A significant drop in ocean freight rates has hardly brought cheer to the exporter fraternity at a time when the overseas market is witnessing a subdued demand.
Prakash Iyer, chairman of Cochin Port Users Forum, said the rates to the European sector fell from $8,000 per TEU for 20 ft last year to $600. For the US, the prices plunged to $1,600 from $16,000, and for West Asia it was $350 against $1,200. He attributed the falling rates to the deployment of bigger ships for cargo movement, leading to increased space availability.
The slowdown across markets has further hit cargo movement. The upcoming Christmas season is likely to benefit the trade by way of reduced freight rates, as shipping lines and agents scramble for bookings. The rates began falling in March and it is up to the trade to capitalise on the emerging market opportunity, he said.
Slack demand
However, shippers are not so optimistic over the development as businesses have slowed considerably. Alex K Ninan, president of Seafood Exporters Association of India – Kerala region, said that holding of stocks by traders, especially in the US markets, has impacted prices and demand with rates of shrimps dropping to $1.50-2 per kg. There are enough stocks in supermarkets and they are reluctant to give fresh orders.
Coir exporters are unable to make use of the drastic freight rate reduction because of a drop in orders by 30-40 per cent this year, said Mahadevan Pavithran, Managing Director of Cocotuft, in Alappuzha. Most chain stores and retailers have cut down or even cancelled 30 per cent of the order they placed in 2023-24. Higher energy costs and inflation resulting from the Russia-Ukraine war has shifted consumer focus from household articles and renovation items to basic necessities.
Binu KS, president, Kerala Steamer Agents Association, said the drop in ocean freight may be beneficial to shippers and consignees but there has been no increase in the overall volume of exports and imports from Kochi. Vessel-related costs (VRC) and operating cost for carriers remain on the higher side and vessel operators are reducing vessel calls by consolidating existing feeder services.
“Earlier we had more than three weekly services from Kochi to West Asia, which is getting reduced to a single weekly service and another fortnightly service, reducing the capacity and sailings by half. Vessel operators’ move to reduce space may trigger some increase in freight levels,’ he said.
Similarly, European and US rates are also on the downward trend but that does not reflect in the volume-level increase. “If we are looking at the overall situation, freight rates nosedived but there is no volume increase from the region,” he added.
