The ever-increasing freight shipping cost is giving a rough time to the exporters. From the past few months, an unexpected uptick in the freight shipping cost has been observed in many countries, causing many exporters to lose their businesses.
A 100% increase in freight cost is seen in Europe and the US, and places such as American West Coast and the UK have observed an increase of over 200 per cent over the last quarter.
“We do a lot of business in South America. The cost of a 40-foot high cube container from India was around $4,000 for the entire fare about four months back. Now it has increased to $10,000,” Makrand Appalwar, MD of speciality packaging firm Emmbi Industries told Financial Express Online.
Many firms in the US and Europe who import from India due to its cost arbitrage, after the increase in are looking to move to different countries like South America, East Europe who have similar labour cost structures as India and import from the country due to technology and ease of operation.
Further, many buyers are also uncertain on making long term commitments for imports.
Milan Thakkar, CEO, Walplast said he is losing export orders. “We somehow continued to manage our business in the Middle East despite the freight rate hike. But we lost our business in West Africa and few Far East countries where the cost has gone up by more than 400 per cent.”
He informed that for these countries on an average the cost of shipping has increased by more than 200 per cent over last year.
The shipping industry was already struggling with the shortage of containers due to the disruption caused by the pandemic. Now, with increasing demand, the exporters are finding it difficult to book space on vessels. Adding to the trouble of the exporters is the fuel price growth that started at the end of last year and is also influencing the freight rates.
Apart from the increased demand and fuel price the increase in freight rate is also attributed to the handful of firms that control the shipping lines in the country and are believed to be monopolising costs to take advantage of the increasing demand.
“During the last 6-8 months the freight charges have jumped from $800 to $2500. While a reasonable appreciation can be justified to fuel price hike, this massive increase witnessed in India allude to a sinister plot of artificial shortage creation and cartelisation by shipping lines,” said Anil Bhardwaj, Secretary-General, Federation of Indian MSMEs (FISME).
He added that this needs to be probed by the Commerce Ministry and Competition Commission of India as to why the difficulty of getting reasonably priced containers is seen only in India and not in China or Vietnam.
Experts believe that India needs to develop its container roadmap very seriously especially if we want to move towards self-reliance. Further they anticipate the problem to accelerate in the times to come as the nation works towards increasing its exports and reducing imports.