The quicker-than-expected post-lockdown bounceback of the global economy has had a domino effect on the shipping sector.
A combination of factors is causing shipping rates to rise exponentially. As the global economy recouped, the shipping industry is struggling to keep up with the pent-up demand. All this is leading to the shortage of shipping containers, further raising prices.
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Why the shortage?
The total number of shipping containers has not changed over the past year. What has happened instead is that the pandemic-related restrictions on international trade have led to a smaller flow of containers in active shipping. The slowdown in shipping due to the pandemic led to a reduction in the number of active vessels. Vessels that were moored then handed off their onboard containers to inland depots and various harbours.
As the economy began to recover, in many areas faster than previously expected, the containers, now stuck at various storage points, are not being sent back into service fast enough.
This has resulted in an overall demand-supply skew for shipping containers, leading to a 500 percent increase in shipping rates in some cases. The turnaround time for vessels has also increased significantly, which further inflated prices for international shipping.
What it mean for Indian traders
Indian importers and exporters are in a fix. The increased turnaround time has resulted in shipments taking much longer than previously, which in turn has reduced exporters’ liquidity since they only get paid after the shipment is completed.
The high cost of shipping containers has also cut into traders’ profits, especially those running smaller enterprises. The infrastructural issues in India have compounded their woes.
Exporters have already asked the government to intervene by framing regulations on the export of empty containers. Many countries are willing to pay a premium price for containers. By limiting the export of empty containers, the situation for Indian traders would improve as more shipping containers would be available for ships departing from India.
(Edited by : Shoma Bhattacharjee)
First Published: IST