Post Date : June 27, 2022
The Sri Lankan economic crisis is proving to be a windfall for Indian global trade logistics, as Indian ports gain from the disruption caused in Colombo. The Mundra port, the third most expensive port in April is now emerging to be the costliest port globally for standard containers for the first time, with the average container price for a 20ft dry container shooting up to $2,489 in May.
Highlighting that the major contributors to the rising cost are the increase in container demand and higher traffic, experts believe that considering the shift in the maritime dynamic, it is the perfect opportunity for India to get itself some permanent shipping diverts towards its shore and move up the global supply chain.
The crisis at Colombo “Due to the Colombo crisis, more and more transshipment containers have been directed to the east coast ports in India,” said Christian Roeloffs, founder and CEO of Container xChange, a logistics tech company that offers a container trading and leasing platform. He added that ports in south India have gradually started expanding their capacity to handle increased cargo traffic owing to the continuing crisis in Sri Lanka.
Another indication is the rising container availability index value at the Nhava Sheva from 0.73 in week 21 (last of May) to 0.76 in week 22. In the following weeks, the CAx is expected to flit between these two numbers, CAx values of over 0.5 mean that more shipping containers are entering the Indian ports, and there is less demand for export boxes.
The month of may also marked the peak of container prices picking up around the world for the first time this year, with 20DC accounting for $2330 (up from $2270), and $4410 ($3,800) for 40 HC containers.
The import and export trade last year was severely impacted due to the shortage of containers and the skyrocketing sea freight cost from China which was up by 200%. Amidst the Sri Lanka tensions, India’s dependence on the port of Colombo is also being highlighted, as around 3 million TEUs of export-import cargo are routed from India via Colombo port every year. Thus, it handles around 50% of Indian transshipment cargo.
“Initial estimates suggest that 50,000-70,000 TEU of Exim cargo are expected to be diverted to Indian ports during the April-June quarter of 2022. However, this is minuscule and constitutes only 2% of the total transshipment cargo routed from India. Intermittent operational disruption in Colombo port has increased the turnaround time for vessels. However, the vessels which cannot wait are only being diverted to Indian ports. The total volume diverted is not very meaningful compared to the overall transshipment cargo volume. Overall volume at Colombo port is not impacted much. But if the disruptions continue for long, it may benefit southern ports and also the Mundra port, which has a deeper draft and mechanized cargo handling for faster turnaround of vessels.”Arunava Paul, Associate Director, CareEdge Ratings
In the longer run, there is an opportunity to develop a transshipment port to replicate Colombo partly. A deeper draft to handle bigger vessels, geographical location, and competitive pricing are the main advantages of Colombo port as compared to its Indian counterparts. The international seaport and container transshipment terminal at Vizhinjam (Kerala), once developed, may provide the best alternative, paul added.