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High freight costs and container dependence knock India's exports; GTRI
Industry News- Sep 16,24
Freight rates for Indian exporters to Europe and the US have more than doubled over the past year, partly due to disruptions in the Red Sea.
India's exports are facing significant challenges due to rising freight costs, a shortage of containers, and heavy reliance on international shipping hubs and foreign carriers, according to the Global Trade Research Initiative (GTRI).
The report highlights the need for India to enhance container production, promote domestic containers, support local shipping firms, and improve port infrastructure. Between 2022 and 2024, the cost of shipping a 40-foot container has seen dramatic fluctuations. Freight rates for Indian exporters to Europe and the US have more than doubled over the past year, partly due to disruptions in the Red Sea.
In 2022, the average cost was $4,942, exacerbated by lingering effects of the COVID-19 pandemic. By 2024, the cost had somewhat stabilized at around $4,775, but these rates are still significantly higher than pre-pandemic levels, which were approximately $1,420 in 2019.
Ajay Srivastava, Founder, GTRI noted that elevated freight rates reflect ongoing supply chain challenges affecting global trade. While there have been unconfirmed reports of China stockpiling containers in anticipation of trade restrictions, the primary issue appears to be broader logistical inefficiencies, including port congestion and disruptions in the Red Sea.
The report also points out that 90-95% of India’s cargo is transported by foreign shipping liners such as Maersk, MSC, and COSCO, which control access and freight rates, limiting India’s ability to manage costs and schedules. Indian shipping companies, led by the Shipping Corporation of India (SCI), handle only 5-10% of trade by volume.
The GTRI stresses the urgent need for India to develop its domestic shipping industry to handle a larger share of its export and import cargo amid rising trade tensions between the US and China and increasing shipping costs.
Approximately 25% of India’s cargo is transshipped through hubs like Colombo, Singapore, and Klang, leading to longer transit times and higher freight costs. Additionally, India’s dependence on containers manufactured in China makes it vulnerable to supply disruptions and price fluctuations.
India currently produces between 10,000-30,000 containers annually, compared to China’s 2.5-3 million. This disparity results in India holding less than 1% of the global container market share, increasing its vulnerability to global supply chain disruptions. Locally produced containers in India are also more expensive, with costs ranging from $3,500-4,000 per 40-foot container, compared to $2,500-3,000 in China. This cost disparity further exacerbates India's reliance on imported containers.
(ET)
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