With containers stuck in China, India braces for higher freight costs and container shortages

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Freight costs have risen by double digits as exporters rush to lock down consignments amid uncertainties over reciprocal tariffs by the US. Shipping companies and Indian exporters are also bracing for a potential container shortage due to consignments being stuck in China, and trade patterns shifting in the near future.

“Freight rates have already shown an initial double-digit uptick as exporters rush to pre-book consignments in anticipation of further disruptions. This spike is impacting cost structures and prompting businesses to evaluate their logistics strategies more closely,” said Swarup Bose, founder and CEO, Celcius Logistics, India’s first online marketplace in cold-chain logistics and warehousing.

While India faces a 10 percent ‘baseline’ tariff after the US suspended the 26 percent ‘reciprocal’ duties for 90 days, the levy remains at 145 percent on China, the biggest exporter to the US.

Bose added that there is a noticeable increase in “precautionary planning” by exporters in categories such as perishables and pharmaceuticals. It means that exporters are taking early steps such as booking shipments in advance or building extra inventory to avoid delays or losses if disruptions worsen. He said exporters are showing early signs of recalibration across the supply chain, wherein businesses are starting to adjust their supply chain strategies in response to the new tariffs and rising freight costs.

Shipping companies also flagged concerns over a potential container shortage in the near future due to delays in containers moving out of China amid its trade war with the US. Vizion’s Tradeview platform, which monitors and analyses container shipping trade flows, stated that container bookings from China to the US dropped to 54,000 TEUs (twenty-foot equivalent units, the industry standard metric) compared to 148,000 TEUs the previous week.

“We have already started seeing some restrictions in the movement of shipments from China. If this sentiment (arising out of the trade war) continues like this for another week or 10 days, not only will freight costs increase further, but container availability will also be an issue,” said Jitendra Srivastava, CEO, Triton Logistics & Maritime Pvt. Ltd.

Srivastava said the impact in terms of increase in freight costs would be at least 10 percent and could go up to 30 percent if the market sentiment does not improve. “Now, if there is no movement out of China, this means that those containers have to be moved empty to some other locations. There is a cost to move those containers empty. So, any impact even between China and the US will have an impact on global freight rates of a shipping line. We will also get impacted on that,” Srivastava told Moneycontrol.

According to Drewry’s World Container Index, the cost of shipping a 40-foot container increased 3 percent to $2,265 per last week.