Container prices have crashed nearly 40% year-on-year, giving the much-needed breather to India Inc. Typically, lower container prices could lead to reduced transportation costs, but the impact on freight rates is not always straight-forward.
Multiple factors come into play, including shipping routes, cargo types and market competition, all of which can influence shipping costs. The pandemic significantly increased the volatility for containers in specific, and for the overall shipping industry in general.
“The global container logistics industry may face significant challenges in the second half of 2023, including a potential recession in the US, rising geopolitical tensions, and increasing operating costs. However, there is some positive news in the container shipping industry, particularly in Asia. Freight rates and container prices have stabilised in the region, showing resilience in the intra-Asia trade routes. This could translate into more predictable shipping rates and potentially more stable supply chains, benefiting businesses that rely on container shipping”, Christian Roeloffs, co-founder and CEO of Container xChange, an online container logistics platform for container trading, leasing and management, told TOI.
Neermoy Shah, associate director, India Ratings and Research, feels the lowering of the freight costs will benefit companies and add to their margins as most of the freight cost particularly in mid-sized entities is borne by the company itself and they may or may not be able to pass on to their customers.
According to the data, there is now an over-supply of containers at the Indian ports, a situation starkly different from around the Covid years. The Container Availability Index (CAx) data for Nhava Sheva, Mundra and Chennai ports, indicates a significant increase in the number of inbound containers this year. The CAx value at 0.81 is well above the threshold of 0.5 since the beginning of 2023 indicating greater inbound containers at the ports consistently.
This could well be corroborated by the rising imports in the country, causing a higher number of container equipment entering the ports leading to increase in availability of containers.
Latest data by the commerce department pegged goods exports in April at $34.7 billion, which was 12.6% lower than a year ago, and a third straight monthly decline. Imports also contracted 14.1% to $49. 9 billion – the sharpest fall since the 33% decline last October. In 2022-23, export of goods and services is estimated to have increased 14.7% to $775.9 billion, while imports were around $894.2 billion, 17.7% higher, resulting in a trade deficit of $118.3 billion.
For the next couple of months till September, the scenario is not very optimistic. There is a slowdown in containerised exports due to a decline in consumer demand from the US, EU and UK markets.
