Trade all at sea: Freight rattled by delays, ship shortages and port congestion as West Asia conflict flares up again
Exporters have raised the issue with the important Ministry of Trade and Industry because emergency and peak season surcharges imposed by foreign shipping lines – as well as detention and demurrage fees – are increasing logistics costs and delaying shipments.
“Ships are making blank calls and not touching ports, so we can’t find containers,” said Khalid Khan, director of export company Geco Trading Corp. “On top of that, China is buying more empty containers than before.”
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Ocean freight rates from the west coast of India to Argentina, which were $3,000-4,000, have more than doubled in the last three months to $9,000. Khan said interest rates to Africa also increased from $3,500 to $7,500.
Freight rates for shipments to the US east coast rose from $5,500 to $9,500, while to Russia more than doubled to $5,000 from about $2,000 a year ago.
Container shipping prices to conflict-affected West Asia saw the biggest increase, from $400 to nearly $3,500. “Our goods are ready to be shipped but shipments have been affected due to unavailability of ships,” said Rajeev Chitalia, president of Electrofocus Electricals.
Demurrage and Detention Expenses
Electrofocus is a manufacturer and exporter of electrical fittings. “Major ships either do not call at JNPT or skip JNPT. Small ships are also rare… The main reason for the serious traffic congestion in the port is the West Asian crisis,” Chitalia said.
He said bookings to ports such as Bahrain and Sydney had been paused for more than a month due to rising freight costs. Container shipping fees for Bahrain rose to $5,600 from $550 before the start of the Iran war on February 28. Rates to Trinidad and Tobago increased from $6,000 to $10,000.
“We also have to pay heavy transportation and detention costs,” Chitalia said. He said the company was saddled with inventory worth Rs 8 crore due to bottlenecks in the supply chain.
Ports on India’s west coast are heavily dependent on Gulf shipping routes, which have been disrupted by conflict. India’s exports to West Asia increased by 7.3% annually to $5 billion in June.
The conflict affected the movement of cargo ships in international waters, particularly in the Strait of Hormuz. After the initial disruption, India started using three ports in Oman – Duqm, Sohar and Salalah – to resume shipments.
“Nhava Sheva and Mundra ports are congested and ships cannot dock on time, causing delays,” said Khushwant Jain, managing partner of Mumbai-based GS Exports, an exporter of oilseeds and spices. “For the last month or two, we have not been able to buy containers to export to Canada due to high freight rates. Orders are being canceled because there is no space on the ships.”
Saying that exporters are also affected by the shortage of food grade containers, Jain emphasized that China buys most of the containers.
Federation of Indian Export Organizations director general Ajay Sahai said exporters had previously faced challenges primarily related to the frequency of long-distance services, but current concerns center around ever-increasing freight rates and the imposition of various surcharges that increase exporters’ logistics costs and impact their competitiveness.
“We are 50 containers short here to fulfill our export commitments,” said GS’s Jain. “Due to war, our containers bound for Oman were stranded at transshipment ports. We paid around Rs 25 lakh in detention, compensation and demurrage charges as the customer refused delivery due to delays. The problem is further complicated by the fact that foreign shipping companies are not registered in India and are available through agencies.”
Exporters stressed that the government cannot control sea freight rates on its own but may ask Europe to favor Indian routes as most shipping lines are continent-based and both sides are currently negotiating a trade deal.
