Shipping industry expects container prices to rise 15-20% ahead of festival period

Representative image.

The shipping industry expects container prices at major Indian ports to rise another 15-20 percent in the next few weeks, due to global disruptions in shipping routes and high demand from European countries and the US.

"India is witnessing a nearly 200 percent rise in oneway pickup in August from July because of shipments for Christmas," ContainerX, an operating platform for container logistic companies, said in its latest report.

Container prices in India had fallen around 10 percent in July when compared to June due to a fall in demand but expectations are that with the upcoming festival season container rates will rise once again.

"We expect the current situation to be temporary and expect the freight rates to go up as the upcoming festive season will bring up container demand and may face short supply," Sylvester D’Mello, Director of Operations, Freightwalla told Moneycontrol. 

Ajai Sahai, DG and CEO, Federation of Indian Export Organisations also said that the rise in container rates is seasonal as shipment for Christmas is taking place.

He added that the expected spike in container rates would have a significant impact on low-value and high-volume goods such as readymade garments, cotton yarn and fabric.

Many shipping lines have also skipped India port calls to maintain schedule integrity due to container shortages as demand from European countries and the US is expected to rise in the coming months due to demand around thanksgiving in the US and regional festivals in Europe.

Additionally, a rise in Indian exports is also expected to lead to an increase in spot container freight rates at major ports in the country, experts said.

“Many companies are likely to get into bidding wars to extradite their export and import cargoes and this is likely to lead to higher tariffs,” a Mumbai-based shipping analyst said.

Furthermore, due to the recently passed Ocean Shipping Reforms Act of 2022 in the US, an additional shipping fee of about $5,000-6,000 will be charged for the fare of a container travelling between India and the US.

"Shipping container rates will definitely rise in the coming months, which will make it difficult for MSMEs focused on exporting products to the US," Raj Kumar Malhotra, Chairman, Export Promotion Council for Handicrafts said.

The EPCH last week had even approached the Ministry of Commerce and Industry, and the Ministry of Shipping to intervene in the matter and provide an alternate viable solution both in the short term and in the long term.

Data from Container xChange showed that the average price of a 20-foot dry container at Chennai port fell to about $2,384 (Rs 1,55,316) in July from about $2,463 in June.

The average price of a 20-ft dry container in Mundra had fallen to $2,384 in July from $2,463 in June. At Nhava Sheva in Navi Mumbai, the average was $2,362 against $2,372 in June.

The price of a 40-ft dry container at Chennai had fallen to $3,969 from $4,127 in June At Mundra and Nhava Sheva, the prices had fallen to $3,605 and $3,918 from $3,955 and $3,929, respectively, in June.

The fall in container rates in July was also due to a 4 percent decline in volumes handled by Indian ports in July, led by a fall in exports of chemicals and engineering goods.