Box lines are trying to increase freight rates in India with surcharges

Container carriers serving the India-Europe trade route are looking at how to lessen the impact of rapidly falling freight rates.

Hapag-Lloyd for example, a strong player on the trade route, has announced a heavylift or container overweight surcharge for shipments booked from the West Indies (Nhava Sheva/Mundra) to Northern Europe from next month.

The levy is US$100 for standard containers over 22 tons gross weight, including container tare weight, effective July 1. The German freight forwarder informed its customers that it will apply to all 20-foot container types until further notice.

Typically at this time, major airlines have attempted to impose “overweight” and similar surcharges to take advantage of peak shipping seasons, albeit often on a larger scale. Hapag-Lloyd’s modest levy is a sign that the shipping companies have recognized that the market is currently on the side of the shippers.

Average export freight rates from India to Europe and the Mediterranean have already dropped well below pre-pandemic levels.

According to forwarders in Mumbai, prices for short-term contract bookings for a teu from Nhava Sheva/Mundra to Felixstowe/London Gateway or Rotterdam are around US$600 compared to US$900 last month. For a feu, haulers are selling about $700, compared to $1,000 a few weeks ago.

For Nhava Sheva/Mundra-Genoa, average selling prices have undergone a downward revision of as much as US$300 per crate over the past week and are now between US$600/TEU and US$700, sources said.

“Demand from the EU has fallen sharply, forcing hauliers to adjust their rates to accommodate as much freight as they can to achieve a reasonable level of loading,” said a Mumbai-based haulier.

So it remains to be seen whether raising surcharge prices will work for airlines unless demand conditions improve.

However, some industry leaders remain bullish on Indian exports. A Sakthivel, President of the Federation of Indian Export Organizations, said: “We hope that exports will start to show better growth figures from July as the situation is expected to improve from the third quarter with new orders or order bookings for the festival and the beginning of the year New Year season improved.”

Naren Goenka, Chairman of the Apparel Export Promotion Council, added: “We believe that with government support and renewed zeal and enthusiasm, we will reach new heights in apparel exports in fiscal year 2023/24.”

Supported by trade diversification, Indian apparel exports picked up some momentum last fiscal year, totaling about $16.20 billion, up from $16.02 billion a year earlier, according to industry data.

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