Ocean freight rates for moving container boxes from Indian ports to Europe have come down by 50 per cent to $450 (about Rs 22,000) per twenty-foot equivalent unit (TEU) from $900 in the last one month. Industry representatives say freight rates, excluding bunker adjustment factor (BAF) and currency adjustment factor (CAF), would come to “zero level” before mid-2009.
According to industry sources, the rates have dropped due to excess availability of space, non-availability of cargoes and the recent drop in crude oil prices.
A senior official from a European shipping line said exporters were paying only BAF, CAF and terminal handling charges. For instance, of the $450 paid by an exporter to move a TEU from an Indian port to Europe, BAF is around $400. Exporters hardly pay $30-40 as freight, which is expected to reach zero level in India by mid-2009.
He said that till mid-2008, shipping lines were making record profits in the Asia-Europe sector, but from last summer onwards, freight rates have been declining. Shipping lines operating between Indian and US ports have also witnessed 28 per cent drop in rates, which had come down to $1,000 (plus BAF) per TEU compared with $1,400 a month ago. The rates are expected to drop by another $100 by February-end.
Impact: A UK-based ship owner said since it was not possible to operate the vessels, it was better to keep the vessels idle at this juncture.
According to reports, the number of container ships lying idle has reached a historic high, with around 255 container vessels lying idle, which translates into 675,000 TEUs or 5.5 per cent of the global fleet. And the worst is apparently not over. Even this figure has been projected to reach 750,000 TEUs in early February.