Between 2022 and 2024, shipping rates for a 40-foot container have fluctuated significantly. Freight costs for Indian exporters shipping goods to Europe and the US have more than doubled in the past year, driven by disruptions in the Red Sea.
It said that in 2022, the average cost was $ 4,942 due to the lingering effects of the covid pandemic, while by 2024, the rate had stabilized around $4,775 and that these rates are still significantly higher than pre-pandemic levels, where the cost was $ 1,420 in 2019.
“The elevated freight rates reflect the persistent supply chain challenges that continue to burden global trade,” GTRI founder Ajay Srivastava said.
He added that there had been unverified reports of China hoarding containers to maximize its exports to the US and Europe ahead of potential trade restrictions and a hike in duties on solar panels, electric vehicles, steel and aluminium manufactured by Chinese firms located in China or elsewhere like in Association of Southeast Asian Nations countries.
However, the real container shortage issue likely stems from broader logistical inefficiencies like port congestion and Red Sea disruptions rather than deliberate stockpiling, Srivastava said.As per the report, 90-95% of India’s cargo is transported by foreign shipping liners, such as Maersk, MSC, and COSCO, giving them control over access and freight rates, limiting India’s ability to manage costs and schedules.Indian shipping companies, led by Shipping Corporation of India (SCI), handle only about 5-10% of trade by volume.
“With escalating trade tensions between the US and China, and the increasing cost of shipping, India must urgently develop its domestic shipping industry to handle a larger share of its export and import cargo,” he said.
About 25% of India’s cargo is transshipped through hubs like Colombo, Singapore, and Klang, increasing transit time and freight costs, GTRI said, adding that India depends heavily on containers made in China, making it vulnerable to supply disruptions and price fluctuations.
Emphasising domestic manufacturing, it said that India produces between 10,000-30,000 containers annually, while China, the global leader, produces around 2.5-3 million containers per year.
“This leaves India with less than 1% of the global market share, making it vulnerable to disruptions in container availability,” Srivastava said.
Locally made containers are important as Indian manufacturers face production costs of $3,500-4,000 per 40-foot container, which is higher than China’s cost of $2,500-3,000.
As a result, Indian businesses remain dependent on imported containers, primarily from China. This reliance makes the country susceptible to global supply chain disruptions, GTRI noted.
Content Source: economictimes.indiatimes.com