A significant drop in shipping rates especially in the US-Europe sector has brought some cheers to the exporters’ fraternity. But many believe that this has come up at the most inappropriate time when the overseas markets are witnessing a slowdown.
Prakash Iyer, chairman of Cochin Port Users Forum pointed out that the current rates to USEC stands at $3000 for 20 ft and $3500 for 40 ft containers while Europe is ruling approximately at $2300 and $2700 respectively.
The cargo movement has been affected badly, as is evident from reduced direct sailings to ports like Kochi. He added that the loss of Bangladesh exports is benefiting Tirupur exporters to some extent, but has not seen a tangible volume increase.
Binu K.S. of Kerala Steamer Agents Association said that the recent drop in shipping rates attributes to many factors, the primary reason being the drop in cargo volumes from Far East to Europe and the US sectors. Anticipating a volume surge, all major operators enhanced their capacity resulting in a steady supply of space and equipment which are being under-utilised during the last couple of months.
Though the major players tried their maximum to keep the rate levels, the volume drop compelled them to vouch for available volumes in the Indian market. This created a competition among major players to attract the limited volumes open in the market leading to price war. Since there is nothing unique in their offers, liners have a Hobson’s choice of offering lower rates, Binu said.
Sabu Jacob, Managing Director, Kitex Garments said that the falling rates would be beneficial to Indian garment manufacturers as it would bring in more business. China had an advantage of reduced freight rates. Already, the unrest in Bangladesh has started giving Indian firms good business opportunity despite the issues connected with production capacity due to surging demand.
J.Rajmohan Pillai, chairman of Beta Group which owns the brand NutKing said the Christmas, New Year buying is over as many Indian firms have made their shipments by September itself. So the industry could not derive any benefits out of dropping rates. With the holiday season concluding and the need for shipments by September to secure benefits, Indian exporters anticipate a shift post-Trump’s inauguration in January. This transition is crucial for exporters to capitalize on reduced shipping costs and resume trade activities effectively, he said.
The declining freight rates present a mixed scenario. While reduced transportation costs may offer a competitive edge in global markets, they also reflect broader economic uncertainties and market volatilities, he added.
Sources in the seafood exporters fraternity said that though the reduced shipping rates would be beneficial to the sector, the drop has not come down to the older level. The US market is already facing a subdued demand with a reported drop in consumption.
