Indian Exporters Boxed in by Container Crunch as Rates Rise to $7,000-10,000 in a Fortnight

Indian exporters across products — from apparel and agricultural commodities to consumer electronics and furniture — are staring at a slump in exports due to a global shortage of containers, and a resultant jump in freight rates, prompting many to seek government intervention.

A severe container shortage – triggered by massive congestions at Chinese ports that are either closed or operating at much lower capacity due to Covid-19 restrictions, along with a huge demand for containers in the US and Europe – has been pushing container rates, which shot up to record levels in the past 10-15 days, industry executives said.

Charges for carrying a container from or onwards to India are now going at $7,000-10,000, up from $3,000-4,000 six to eight months ago, they said. Cost varies depending on the distance covered.

Exporters worry that the double whammy of rising container rates and container shortage will hamper the recent boost in the country’s merchandise exports that hit $35.42 billion in July – a new high for any month.

Federation of Indian Exports Organisation (FIEO) and other industry bodies have flagged the issue with the Centre, seeking its intervention and support. Otherwise, India may lose out in the global trade ahead of the crucial holiday season orders in the West, they said.

Tea exporters have sought enhanced limit in the Transport and Marketing Assistance (TMA) Scheme, which is used to offset a part of the transport and freight cost borne by exporters. While TMA is for agricultural exports only, FIEO has asked the commerce ministry to come up with a freight subsidy scheme to help all categories of exporters.

With some large shipping lines now hauling empty containers from India to the US and Europe, the apex exporters’ body has also urged the government to come out with regulations to stop this.

Exports Stopped in Some Categories

“Also, there are 25,000-30,000 containers lying at different ports in the country, not being unloaded due to some disputes with Customs and other departments,” said Ajay Sahai, director general of FIEO. “We have asked the government to intervene so these containers can be unloaded in some private warehouses and then used by exporters.”

Low value-high volume export items such as granite tiles and furniture are the worst hit, and some categories have completely stopped, said FIEO, which has also approached the shipping ministry.

Poorna Seenivasan S, President at Gokaldas Exports, one of the largest Indian exporters of apparel, said the three-times surge in container rates, and shortage are leading to delay in shipping.

“The retail market has picked up in the US and they need goods,” he said. “The brands have realised and are shelling out the additional shipping cost but still, it is a struggle to get containers. We were earlier using the ports in Chennai and Tuticorin, but now have started shipping from any port, like Mumbai, where we are getting containers.” A few weeks ago, container charges had shot up to a record $15,000, Seenivasan said.

Electronics industry body Consumer Electronics and Appliances Manufacturers Association president Kamal Nandi said very few containers are available in India, as most are moving to the US and Europe. “Exports will be badly hit in August,” he said.

Commodities Hurting

Tea exporters have written to the commerce ministry, saying buyers from the West Coast of the US have threatened to not lift teas from India, instead importing from Sri Lanka and Kenya.

“For the last two months, there are hardly any containers at Kolkata Port, from where the majority of teas go to the world markets,” said Anshuman

Kanoria, Chairman of Indian Tea Exporters Association. “This will impact tea exports from India and it will not even touch 200 million kg in 2021, as compared to 207 million kg in 2020.”

Gurnam Arora, joint managing director of Kohinoor Foods, a major exporter of basmati rice, said the commerce ministry has told exporters that a big cartel is working to keep the ocean freight high. “The new crop will start arriving in October and we are clueless about how to tackle the export situation,” he said. “Many have put their exports on hold and are waiting for freight cost to come down.”

Vinod Kaul, executive director of All India Rice Exporters Association, said basmati rice exports were down 17% in the first three months of FY22. “Even non-basmati rice exports have seen a drop in this period. If the situation does not improve, exports of basmati rice will be 25% less than FY21,” he said.

Bump in Exports

As per the commerce ministry, India’s merchandise exports grew 50% year-on-year in July to $35.42 billion. However, several products may report a decline in exports in August, as the container shortage issue peaked this month, industry executives said. Export value of products such as tea, coffee, rice, tobacco, spices, cashew, meat, dairy, poultry products and iron ore declined in July itself, they said.

The FIEO chief said there is no drop in exports in value terms, but only due to movement from ship to air and also due to increase in price of metals and other commodities.

Export value of small-volume products such as gems and jewellery, chemicals, smartphones and leather products has grown in July since most of these are shipped through air.

Smartphone industry body India Cellular and Electronics Association Chairman Pankaj Mohindroo said the container issue is not impacting the industry due to exports through air.