Shipping costs skyrocket, exporters feel the heat

Ahead of the crucial Christmas season, shipping costs have skyrocketed since August, compounding woes of exporters already grappling with a string of adversities this year — from a Covid-induced cancellation of orders and exodus of migrant labourers to a drastic cut in government benefits.

Freight for a 20-foot container for shipments from Mumbai to Dubai zoomed 25 times, from just $10 before August to $250 now, said Vivek Aggarwal, director (sales and marketing) of major food exporter Capital Ventures and vice-chairman of the food and beverage committee of the state-backed Trade Promotion Council of India (TPCI).

Similarly, the freight rate has shot up by more than seven times for Singapore and five times for Hong Kong since August. It surged 282% for Australia, 117% for Qatar, 185% for Stockholm, 181% for New Zealand and 108% for New York, Agarwal told FE. A slide in imports in recent months and the consequent decline in the number of vessels entering India for unloading supplies has been a major contributor to the shortage of containers, exporters say.

This has inflated the shipping bills of exporters, who used to book these containers at reasonable costs for onward delivery. The shortage is particularly more troubling for farm and food product exporters, many of whom are small and medium businesses and who are mandated to comply with stricter quality standards.

Importantly, the sudden spike in freight calls for a grand shipping strategy, as the government plans a sustained push to domestic manufacturing to trim imports and boost exports.

On an average, the freight cost has gone up by 190% for various destinations in West Asia and by 159% and 54% for those in Europe and the US, respectively, since August, forcing exporters to seek government intervention. No wonder, having grown by over 6% in September, the first year-on-year rise since February, exports dropped again in October. “While orders, especially in food and farm products are flowing in, the shipping costs have forced exporters to review their contract value.

Of course, analysts partly attribute the higher September shipments to exporters rushing to honour earlier commitments upon the gradual lifting of lockdown curbs since June.

In its presentation to commerce and industry minister Piyush Goyal at the Board of Trade meeting on Wednesday, the Federation of Indian Export Organisations, too, highlighted the issue. It pitched for the expansion of the Shipping Corporation of India or wooing key private players to set up large national shipping companies. At the same time, it wants Indian Shipyards to manufacture containers to address short supply . It also pushed for a regulator in the shipping sector to approve levy of any charge by the shipping lines.