High container cost impacting India's exports

Increasing container freights would push the overall cost of domestic goods in the international markets, which would make it less competitive and hurt the India's merchandise exports, Trade Promotion Council of India (TPCI) said on Tuesday.

It said that new records have been hit in container freight spot rates of all carriers and further rise is expected this month. "The industry is worried that if this situation persists, there can be a five per cent to eight per cent increase in the cost of goods from India. This will have an impact on exports too due to equipment shortages or shipments will be postponed due to very high ocean rates. Demand for Indian products will slow down due to high cost," the council said in a statement.

Quoting Sandip Patel of SLT Food Inc, and a US based TPCI member, it said that during pre-Covid, cost out of India to North America was on average $1,800 per 20 feet container, which has now touched a high of $6,000 per 20 feet container. "Comparing this to previous months, container trading data reveals that during the first trimester of 2021, the average prices for 20 feet containers across Europe rose 57 per cent. A surge in demand along with unexpected high volumes and pandemic-related restrictions were the main difficulties that lead to this problem," he said.

Patel added that the problem started when global economies started entering lockdown during the first half of 2020, while China was recovering from it. "The entire world bought medical protective equipment from China, but once those containers arrived and were unloaded in the US or European ports, and due to the lockdowns that those countries were experiencing, there was not enough merchandise produced that allowed those containers to be filled and shipped out. "Meaning, containers ended up stacking empty in places they were not needed, and they did not make it back to places they were supposed to," he said. Shrikant Devhitka, Export Sales Director at Savion Ceramic (Q-BO) too said that the ocean freight cost also kept on increasing after opening of the market from Mundra port in Gujarat to US, which was between $2,000 and $2,200 six month ago and today it has gone up to $10,000 to $11,000. "Our orders are getting diverted to Turkey and Spain as they are closer destinations to the export market," Devhitka said.