The pandemic has created severe containers shortage in India. Owing to this, India exporters are subjected to high freight rates by carriers. Note that, this trend does not honour and uphold the contracts.
Shipping and Logistics Crisis in India- Container Shortage and Increased Fright Rates
The freight costs have increased over 300% due to the COVID-19 cases in the country. Thereby putting pressure on the Indian SMEs that were striving to navigate their livelihoods during the global pandemic. At the same time, Drip Capital released a research paper outlining the global shipping crisis and its impact on rising freight costs. The said container shortage is drastically affecting SME Exporters. Not only does the high costs affect the exporters, but also, affects the exporter’s capability to fulfil orders on time. Thereby, delaying the payments cycles and imparting stress on the margins.
Global Shipping Crisis
The main reason for the current global shipping crisis is the raging pandemic. Subsequently, the unbalanced recovery of the economy between importing and exporting countries also plays a role in the crisis. For instance, China contributed 16.1% of all the international exports. However, China’s exports have dropped down by 17% in 2020. Further, the economic contractions and abandonment of Asia containers in North America and European ports. As a result, the world is dealing with no availability of containers, no workforce, lack of shipping vessels, and erratic movements to deal with the demand.
Increased Container Rates Post COVID
The Federation of Indian Exporter Organisations (FIEO) confirms the rise in Container rates since the COVID- crisis. For example, a 40ft container to the US was $2000 before the COVID crisis, now it costs over $6000. Similarly, costs for Europe have increased from $1200 to $5000. Also, the freight rate for shipments from West Africa has increased six times. This has led to huge delays in shipments and harms port as well.
The shortage of containers and the increased freight rates have affected the trade in India. Thus, affecting the Indian exporters significantly.