Demand pressure cuts into carriers’ rate push on Indian trades

Tuesday, 16 August 2022 12:42 - - {{hitsCtrl.values.hits}}

Container carriers serving Indian trades appear somewhat wary about their ability to realise full recovery of new rate increases of a significant level amid a slowdown in volume levels.

In an apparent move towards that end, Mediterranean Shipping Co. (MSC) has revised its peak season surcharges (PSS) on the India-US trade, cancelling a $ 2,000-per-container notice that was to be implemented from 1 August. The Geneva-based carrier will instead apply $ 1,000 per container from 22 August.

“In order to maintain the high level of reliability and efficiency of our services to meet the needs of our customers, MSC will apply PSS effective 22 August handover ex-India to USA and San Juan, Puerto Rico,” MSC Agency (India) said. “This will be applicable for all containers.”

According to freight forwarder sources, there have been no PSS announcements by other liners/consortia operating regular services on the same routes.

The ongoing demand pressure has kept average rate levels on larger trades out of India steady over the past three months.

“Freight rates have been driving towards the lower end of the graph as there has been a sharp decline in freight costs in China since June,” said Sylvester D’mello, director (operations) at Mumbai-based digital forwarder Freightwalla.

D’mello noted, “As per the Freight Indices Data worldwide, freight rates are just peaking and will stabilise in the second half of 2022.”

He went on to explain, “Freight rates for major routes have declined, and falling prices have also eased the availability of containers. Shippers and logistics companies are in a better position at this juncture, hoping the momentum will continue for a more extended period and rates will return to the pre-pandemic level soon. It is probably a reassurance for the traders and shippers, but a slight uptick may be witnessed around mid-August when the festive season begins.”

Indian exporters are also struggling to keep up the pace of export demand as a consequence of inflationary effects hurting major global markets, which industry observers believe would heighten in the days ahead.

Sakthivel, president of the Federation of Indian Export Organisations (FIEO), said, “Signs of a likely slowdown in exports can be seen as global inventories are pretty high and the merchandise exports are facing the triple whammy:

i) There is again a shift in consumption from goods to the services with opening up of economies after the COVID-19 pandemic;

ii) Inflation affecting all economies reducing the purchasing power and

iii) Many economies entering a recession while some advanced ones are already in recession.

Sakthivel added, “The reduction in voyage time, with normalisation of COVID disruptions, have also added to the inventory hike as goods which used to reach the West Coast of US in 150 days now reach in 60 days.”

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