NEW DELHI:
Freight rates
have surged nearly 70% year-on-year in Aug across
Indian ports
, reflecting global
shipping disruptions
, sustained demand and capacity constraints, which will add to the cost burden of India Inc. The increase comes after a gap of over two years.
Average prices for 40ft high cube cargo-worthy containers surged quarter-on-quarter this year from $2,600 in Q1 (Jan-March, 2024) to over $2,800 in Q2 (April-June, 2024) across domestic ports, including Chennai, Nhava Sheva and Mundra, industry experts told TOI.
So far, the third quarter (July to Sept) shows an uptrend too. Multiple factors, including shipping routes, cargo types, and market competition, can influence shipping costs.
Ongoing
geopolitical issues
have led to sky-rocketing of freight costs, which are likely to squeeze the margins of domestic companies with a sizeable international exposure in FY25, analysts say.
Freight rates have witnessed huge fluctuations since 2020, initially following an upward trajectory starting in 2021. The rise was driven by the ongoing waves of Covid-19, which disrupted supply chains and severely impacted global trade.
Rates began to cool off in FY23 as supply chains gradually stabilised. However, due to geopolitical tensions, freight rates started to rise again in Jan 2024, as disruptions such as the Red Sea crisis forced ships to reroute around the Cape of Good Hope, with the detour increasing both time and costs of freight and insurance.
Among the ports, container prices in Chennai increased by 50% from April to Aug 2024, reaching $2,340, marking the highest growth among Indian ports. The increase could be attributed to several factors, including higher local demand and congestion, Christian Roeloffs, co-founder and CEO of
Container xChange
said.
“After a brief pause, rates shot up further in May and June 2024, exacerbated by a container shortage particularly for cargo originating from
North East Asia
, given the impending duty hike on electric vehicles announced by the US. These geopolitical issues have once again increased the freight costs for Indian companies, which are likely to affect the
EBITDA
of companies with sizeable international exposure by 100-200bps on average in FY25,” Khushbu Lakhotia, director, India Ratings & Research said.
However, Aug indicates a slight softening in the rate month-on-month to $2,100 over $2,200 in July, the latest data from Container xChange, an online container logistics platform, said.
