In a world already bruised by skyrocketing freight rates and tight vessel capacities as an after-effect of the COVID-19 pandemic, the acute shortage of containers- the life of maritime logistics- has set off a chain of logistical challenges. In this story, we dive into the ongoing Container Scarcity Crisis, the impact of it on India’s trade and commerce, the possible solutions and the long term picture that it presents as we consult the top stakeholders of the industry.
Shipping containerisation has completely revolutionised the shipping industry. As one of the greatest innovations in modern history, it has led to explosive growth in global exports and imports.
However, a block in such a nerve centre of maritime logistics has set off a chain of events in the rest of the industry. The ongoing Container Scarcity Crisis has brought trade and commerce to almost a standstill while highlighting the importance of containerisation in global trade amid the grim ambience of the pandemic and the imposed lockdowns. We look at the reasons behind the crisis at hand and the possible solutions to it.
A slump in imports especially from China, along with a sudden rise in exports has thrown the import-export balance at present. The waiting time for a container for exporters is now two-three weeks, compared with a maximum of four days earlier, shared industry executives. The prospect of the cycle to become regularised looks bleak, with the Indian festive season still on and the Chinese New Year holidays approaching.
Derrick Sequeira, Cluster Head – Sea Logistics, Kuehne+Nagel India, Sri Lanka, Maldives speaks about it in depth.
“India has experienced unprecedented exports over the past 3 months with the country reporting 3%-5% additional containerised volumes compared to the same period last year. On the other hand, there are zero buffer stocks and negative count on container availability, the logistics of empty containers has been an extreme challenge especially due to equipment being repositioned on trade with high demand and high revenue.”~Derrick Sequeira, Cluster Head – Sea Logistics, Kuehne+Nagel India, Sri Lanka, Maldives
Manoj Arora,President – Corporate Sales & Marketing, J M Baxi Group talks about the impact of it on India’s trade and walks us through the primary impact of the container scarcity crisis.
“Indian trade historically has been that of comparatively higher imports which means empty containers were always readily available to exporters almost always from most ports and ICDs across India”, explains Mr Arora.
“Since lockdown India’s import volumes fell by around 30% but exports sustained and in fact improved on back of surge in agricultural and metal exports in particular. With the economy further opening up and other industrial manufacturing activities restarting, general export volumes have picked up adding to increasing container demand.”~Manoj Arora,President – Corporate Sales & Marketing, J M Baxi Group
A combination of reasons like import volumes consistently falling, quarantine of vessels and reduced volumes from China in particular which has been the primary source of India’s imports has forced the shipping lines to cut down on their services to India which has further added to general shortage of availability of containers for exports, he said.
Reasons for Shortage:
The import-export imbalance can be traced back to March,2020 ever since the COVID pandemic took centre stage. In addition to the unexpected crisis, the sudden decline in imports from China also added as a causative factor for the imbalance.
PS Atree,Director,P.S.Atree & Company Pvt. Ltd. provides a point-wise analysis, tracing the development of the shortage.
“Basically India is facing container shortage due to export-import mismatch/imbalance since March, 2020. This imbalance of import and export is attributable to COVID-2019 pandemic all over the world.”
He also attributes it to the restrictions by the Government on import to promote Make in India project/theme, decrease in import of metal scrap from Gulf/Saudi countries and a sudden improvement in exports after start of unlock of COVID-2019 from June, 2020.
“In such a situation, the government should act fast to ensure availability of sufficient containers for exports especially for USA as cargo volume from India is extremely strong as US importers are replenishing inventory depleted during shutdown period in India. The Government should take immediate steps to enhance new containers manufacturing facilities in India which is very limited keeping in mind the present scenario of imbalance in import and export volume.”~PS Atree,Director,P.S.Atree & Company Pvt. Ltd.
Colombo Port Congestion:
Colombo commands a major share of India’s transshipped volume, particularly for trade in and out of the country’s east coast corridor with fewer direct long-haul sailings.
However, a backlog of 50,000 TEU at the port of Colombo is spelling chaos and unrest for South Asian transhipment cargo.
The bottleneck is now seriously affecting supply chains in neighbouring India and Bangladesh.
Kaushik Barua, Managing Director, Asia Pacific Logistics shares more information about it.
“The Colombo port has been an important transshipment hub for South Asian countries. The ongoing congestion at Colombo port is fueling container scarcity in South Asian countries as empty/laden containers are reaching to these ports at late and it is creating container shortages in those countries for export uses. On the other hand, containers are taking more time than usual to reach destinations especially European countries and shippers risk penalty or rejection of cargoes by consignees for late delivery.”~Kaushik Barua, Managing Director, Asia Pacific Logistics
High Freight Rates
Amid the grim picture of the pandemic, with severe congestion at the transhipment hub, shortage of containers inevitably, freight rates have doubled out of Colombo, with shippers needing to book up to eight weeks in advance to get a slot.
Captain Dinesh Gautam, President, NAVKAR Corp Ltd talks about how grave the situation at hand, is.
“The situation is bad. We require 1200-1300 containers every month; right now, we hardly get 800 containers. We are falling short of 400 containers, which only get added to the next month. The issue of high freight rates is leading to firefighting operations every day.”~Captain Dinesh Gautam, President, NAVKAR Corp Ltd
Mr Arora explains how the two major problems of the ongoing container scarcity crisis and skyrocketing freight rates coincide.
“Empty repositioning of containers and related cost is one of the main factors in establishing freight rate for any trade lane globally” explains Mr Arora.
“Until mid- 2020, Shipping lines and NVOCCs had to ship out excess empty containers out from India as imports were regular. Since July, when Indian economic activity restarted, lines had to reposition empty boxes to various Indian ports and ICDs at obviously very high costs. This cost naturally led to increase in export freight rates.”
Repositioning of empty containers has emerged as the most preferred solution while consulting the leading stakeholders of the industry on the probable ways to solve the crisis at hand.
A marked increase in imports across the country, along with empty repositioning will also augur well for the industry, as Mr Arora points out by observing the recent growth in imports.
A marked increase in imports across the country, along with empty repositioning will also augur well for the industry.
Surajit Sarkar, Chief Operating Officer, NLDS sheds lights on the empty repositioning of containers and why it is a viable option for ports in the southern part of the country.
“The areas in the western corridor of the country are far away from the transshipment port, be it Colombo, Dubai, Chittagong. Hence, bringing back the empty inventory and striking a balance has posed a challenge because when there is a shortage of inventory, to fulfill the gap, you have to get it from a nearby transshipment port where it available and there is quote to it. Unless the gap is minimised, it cannot be fulfilled. When you look at India also, in terms of import-export, all the ports are very balanced. When you look at ports like JNPT, Mundra etc., they are quite balanced. However, on the contrary, the southern part is not as balanced. For southern ports,Colombo is nearby, thus instead of carrying the empty containers from western part of the country, to fulfill the market requirement, they opt for empty repositioning from Dubai or Colombo because logistically that is viable”, he explains.
“Empty repositioning requires transparency and that is only possible through digital platforms and that is what we are working for and 6 months down the line, we feel we can give visibility to the trade.”~Surajit Sarkar, Chief Operating Officer, NLDS
Mr Atree addresses the issue of extra freight charges that are being charged by shipping lines and how exporters should be helped with incentives.
“Government should also give incentives to the exporters to meet out the extra freight cost being demanded by the shipping lines due to scarcity/shortage of export containers”, he said.
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