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CN analysis: Slowing exports send freight rates on major trades out of India further downwards

With export volumes moderating, average container freight rates across major trade lanes out of India have seen measurable downward revisions this month, from the levels held by major carriers in July, the latest market analysis by Container News suggests.

On the westbound India-Europe trade, rates from West India [Jawaharlal Nehru Port (JNPT)/Nhava Sheva or Mundra Port] to Felixstowe/London Gateway (UK) have dropped to US$4,700/TEU and US$5,200/FEU, down from US$5,250 and US$5,950, respectively, last month.

For shipments from West India to Rotterdam, average rates have also fallen by double digits, down to US$ 4,650/TEU and US$5,200/FEU, from US$5,250 and US$5,750, respectively.

The ongoing rate slide for eastbound trade has continued into August – now hovering at around US$1,750/TEU and US$1,900/FEU, versus US$1,850 and US$1,950 for shipments from Felixstowe/Rotterdam to Nhava Sheva or Mundra.

After staying steady over the past few months, contract rates for Indian cargo to the US East/West coasts have also cooled from the July levels – averaging at US$7,950 per TEU, from US$8,350, and US$10,000 per FEU, from US$10,500, for bookings to the US East Coast (New York), and at US$8,350/TEU, from US$10,250, and US$10,600/FEU, from US$12,850, for loads to the US West Coast (Los Angeles).

However, for the West India-US Gulf Coast trade, rates have moved further northwards -- hovering at around US$10,250 per TEU and US$13,000 per FEU, versus US$9,150 and US$11,500, respectively, in July.

On the return leg, average rate levels have remained steady with the prices maintained by leading liners last month – at US$1,075/TEU and US$1,450/FEU from USEC; at US$2,500/TEU and US$3,200/FEU from USWC; and at US$1,800/TEU and US$1,850/FEU box from the Gulf Coast into West India (Nhava Sheva/Mundra).

On the India/intra-Asia/Far East trades, demand continues to remain strong and as such, rates have climbed again this month from the July trends, propelled by China's post-lockdown trade rebound.

For cargo loads from West India to South China (Yantian), current average rates are at US$600/TEU and US$925/FEU, up from US$550 and US$850, respectively, a month earlier.

For West India-Central China (Shanghai), carriers are accepting bookings at about $550/20-foot container and $850/40-foot container, compared with US$500 and US$750 in July, on average, according to the data analysis.

“The shipping lines have been consistently repositioning empty containers into the country at a huge cost and increasing their capacities so as to help the Indian export trade,” Sunil Vaswani, executive director of the Container Shipping Lines Association (CSLA), told Container News.

“During the year 2021, 1.85 million TEUs of empty containers were repositioned into the country & new services introduced, thereby increasing the capacity by about 35,000 TEUs a week. These efforts have continued this year too which have contributed towards the softening of the rates,” Vaswani added.

Local freight forwarder sources have also noted the positive signs on carrier pricing.

“The opening of the economy and availability of containers is pushing the freight rates towards the lower end of the graph. During the lockdown phase, a large volume of containers was held up in different parts of the country, leading to the panic ordering of new boxes in huge quantities,” said Sylvester D'mello, director (operations) at Freightwalla.

“As markets reopen and demands soften, the oversupply forced the price correction of the containers. Additionally, the average container prices and leasing rates have been declining globally since the start of the new year. The lowering rates in the spot pricing help bring down long-term contract rates,” D'mello noted.

“The current scenario is a total turnaround from the plight at the beginning of 2022; due to geopolitical tensions, prices were anticipated to go up, but many shippers and forwarders across the European and the US belt predicted low rates due to softening demands. Indian coasts are also running dry due to the monsoon season's low export volume. Similarly, in Q2 2022, Asia to the US west coast fell 50% and is continually dropping. A similar drop was seen in Asia to Europe routes.

It could be 'the' moment for MSMEs [micro small-to-medium enterprises] to understand the scenario and plan their future shipments, and this will have them negotiate contracts at reduced rates, provided the reduced prices are in-effect by major shipping lines. The reduction in ocean transportation costs is excellent news for the MSME exporters after two years of rapid rate surges. It is a time for small and medium-sized businesses to leverage the situation and build up international trade operations. We expect the current situation to be temporary and expect the freight rates to go up as the upcoming festive season will bring up container demand and may face short supply,” he concluded.

Jenny Daniel
India correspondent

Contact email: [email protected]

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