Container shortage, freight spike shake maritime economy in India

Weak global cues and a volatile geopolitical scenario have hit Indian merchandise traders, with shipping rates becoming a major impediment for exporters.

Data shows that shipping costs and container prices for Indian ports have seen sustained growth over the past few months.

“There is a global shortage of containers, mainly due to the logistical inefficiencies like port congestion in Southeast Asia and red sea disruption. Consequently, freighters must take a detour and opt for a longer route around the Cape of Good Hope. This detour has increased not only the shipping costs but also delivery time, further exacerbating the challenges,” said Aniket Dani, director – research at CRISIL Market Intelligence and Analytics.

The average price of a cargo-worthy 20ft container in India is $1,113 in September 2024, reflecting a slight increase from $1,010 in August, according to Container XChange, an online container leasing platform.

Average prices for 40 ft high cube cargo-worthy containers ranged between $1,200 and $1,500 across major Indian ports like Mundra, Nhava Sheva, and Chennai in Q1. 

These prices had surged to an average of $2,000-$2,600 in August 2024, reflecting sustained demand and capacity constraints.

India’s merchandise exports also contracted by nearly 10 per cent in August. Both officials and traders highlighted the challenges in transportation. 

“Some of the exporters have diverted to the domestic market as profitability in exports has taken a hit with a sharp rise in international freight (both ship and air). Had it not been for these trade disruptions led by logistical challenges such as lack of shipping space, irregular shipping schedule, ships skipping Indian ports and declining commodity prices, merchandise exports would have recorded growth,” Federation of Indian Export Organisations (Fieo) president Ashwani Kumar said.

According to experts, Mundra Port has witnessed severe congestion and backlog issues at the port.

A reason for this congestion is increased volumes from larger ships, which take longer time in loading and unloading.

Also, the limited infrastructure leads to crowding of berthing space, moonlighting, and defect liability yard storage. 

“There are a lot of operational inefficiencies like Customs clearance, documentation and intermodal transfers that lead to delay and congestion.

Going forward, collaboration among government authorities, industry members and Adani Ports & SEZ will be essential during the period of high-growth and congestion. Development of infrastructure remains a key factor in easing congestion and dealing with inefficiencies. There is a long way to go, and these difficulties are expected to remain in the near to medium term. Formulation of policies to address this issue and steps to implement them remain key monitorables,” Dani said.
 

India continues to bear the brunt of global uncertainties, according to the Global Trade Research Initiative. 

“This reliance on foreign shipping exposes India to rising freight costs, geopolitical risks, and logistical uncertainties. With escalating trade tensions between the US and China, and the increasing cost of shipping, India must urgently develop its domestic shipping industry to handle a larger share of its export and import cargo,” said the think tank.

Global container market has been far more volatile. Between April and July, the Drewry World Container Index doubled to nearly $6,000 per 40-ft container. In the following period, it has been on a consistent decline, and currently is at $4,168.

“In the global context, the container logistics market in India has displayed resilience amid market volatility that the Asian container logistics market is experiencing since the onset of Red Sea diversions in November last year. Average container prices in India have been less volatile than other Asian countries compared to 2023 and since the beginning of 2024,” said Christian Roeloffs, co-founder and chief executive officer (CEO) of Container xChange.

Roeloffs had in June said that the spike in global freight demand wasn’t being driven by real consumer consumption. It was rather due to preemptive ordering of goods, which could lead to volatility.