A growing cargo crunch seems to be prompting container lines serving Indian trades to devise new strategies to attract volumes to fill their vessels.
Among the major carriers serving the trades is CMA CGM and the French carrier is offering discount vouchers to customers booking shipments on its spot window.
For example, from India to Australia this week, it offered a “SpotOn” discount of $300 per teu, a Mumbai-based freight forwarder said.
A sales executive at the forwarder explained that the incentive varied from trade to trade, depending on vessel utilisation factors and added: “Instead of aligning spot rates with the market, CMA CGM is offering discounts through vouchers.”
Most carriers swiftly align their spot rates with demand rather than indirectly discounting prices off published rates to gain more freight and forwarder sources believe CMA CGM’s strategy is akin to what ecommerce platforms, especially Amazon, offer online shoppers, in the form of e-gift cards, to drive sales.
Spot ocean rates on India’s major headhaul trades, such as to Europe and the US, have dropped substantially over the past two months, data from market sources indicates. For example, average rates from West India to North Europe are now down to about $2,000 per teu, from $5,000 per teu in August.
With container volumes slipping, the market is seeing aggressive pricing, with carriers, even within an alliance, undercutting each other on booking rates. An influx of capacity by carriers to adjust to the longer transits around the Cape of Good Hope, on top of previous service additions in anticipation of sustained trade growth out of India, also contributed to rate declines, sources believe.
Indian exports, for most verticals, have been under pressure for the past few months amid geopolitical challenges.
“Rising tension between Israel and Iran has led to logistics challenges, as most of our trades to Europe, Africa, CIS and the Gulf happen through the Red Sea route,” said Ashwani Kumar, president of the Federation of Indian Export Organisations (FIEO).
And high credit costs remain a major concern for Indian exporters navigating demand challenges and the Indian government is reportedly considering a more attractive interest subvention scheme to help tide exporters over the crisis.
“The urgent and immediate need of the hour is to take steps on the liquidity front, with deeper interest subvention support and extension of the interest equalisation scheme for at least five years, creating a predictable business environment for the exporters,” Mr Kumar said.
But FIEO took some solace from the latest trade data, as national goods exports by value in September modestly rebounded, with a 0.5% year-on-year gain, after a steep 9% decline in August.
“The marginal increase is still a good sign,” the federation said.