Indian exporters losing business over exorbitantly expensive freight costs, container shortage

Freight shipping costs have been going through the roof over the last few months, causing exporters to lose business from several countries. The freight cost to both Europe and the US have increased by 100 per cent, and to places such as the American West Coast and the UK there is an increase of over 200 per cent over the last quarter. 

The cost of a 40-foot high cube container from India was around $4,000 for the entire fare about four months back. Now it has increased to $10,000 for the same container. Firms in the US and Europe import from India because of the cost arbitrage. But, countries like South America, East Europe have similar labour cost structures as India and import from the country due to technology and ease of operation. Many importers in South America are finding Indian costs non-viable, and according to a few media reports, are moving to Romania or Turkey.

Exports to West Africa and few Far East countries have gone up by more than 400 per cent. For these countries the cost of shipping has increased by more than 200 per cent over last year.

There has been a shortage of containers since the last year due to the disruption in the supply chain caused by the pandemic. But, as demand is growing, the exporters are finding it difficult to book space on vessels. In addition, the fuel price growth that started at the end of last year is also influencing the rates.

While the price rise is attributed to the demand supply market dynamics, many believe that since a handful of firms control the shipping lines in the country, they could be monopolising costs to take advantage of the increasing demand. 

“During the last 6-8 months the freight charges have jumped from $800 to $2500. While a reasonable appreciation can be justified to fuel price hike, this massive increase witnessed in India allude to a sinister plot of artificial shortage creation and cartelisation by shipping lines,” said Anil Bhardwaj, Secretary General, Federation of Indian MSMEs (FISME) in a Financial Express report.

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