Container prices collapse 40%, relief for India Inc

Container prices, which have risen sharply over the past three years, have fallen nearly 40% year-on-year, giving India Inc. a much-needed breather on freight costs.

Average container prices in the country fell to $2,088 from $3,288 in March, indicating more predictable shipping rates, better margins for companies and potentially more stable supply chains, industry experts say.

Freight rates and trade have been severely impacted post-pandemic due to skyrocketing costs of up to 200% and container shortages, negatively impacting companies’ profits. Last year the situation began to improve, and now the trend in container supply is reversing.

Container prices have collapsed nearly 40% year-on-year, giving India Inc. a much-needed breather. Typically, lower container prices could result in lower transportation costs, but the impact on freight rates is not always clear cut.

There are several factors at play, including shipping routes, freight types, and market competition, all of which can affect shipping costs. The pandemic has significantly increased volatility for containers in particular and for the entire shipping industry in general.

“The global container logistics industry could face significant challenges in the second half of 2023, including a potential US recession, rising geopolitical tensions and rising operating costs. However, there is also some positive news from the container shipping industry, particularly from Asia. Freight rates and container prices have stabilized in the region, showing the resilience of intra-Asian trade routes. “This could lead to more predictable shipping rates and potentially more stable supply chains, which would benefit companies that rely on container shipping,” says Christian Roeloffs, co-founder and CEO of Container xChange, an online container logistics platform for container trading, leasing and management.

Neermoy Shah, Deputy Director of India Ratings and Research, believes that reducing freight costs will benefit companies and increase their margins as most freight costs, especially for mid-sized companies, are and may be borne by the company itself is or cannot pass on to their customers.

According to the data, Indian ports are now experiencing an oversupply of containers, a situation quite different from the situation in the Covid years. Container Availability Index (CAx) data for the ports of Nhava Sheva, Mundra and Chennai indicate a significant increase in the number of incoming containers this year. At 0.81, the CAx value is well above the 0.5 threshold since early 2023, indicating a continuous increase in container arrivals at ports.

This could well be confirmed by the rising imports in the country, causing more container equipment to enter the ports, leading to an increase in container availability.

The latest data from the Department of Commerce put April merchandise exports at $34.7 billion, down 12.6% from a year ago and a third straight monthly decline. Imports also fell 14.1% to $49. 9 billion — the sharpest drop since last October’s 33% drop. In 2022-23, exports of goods and services are estimated to have increased by 14.7% to US$775.9 billion, while imports were around US$894.2 billion, up 17.7%, leading to a trade deficit of $118.3 billion.

The scenario is not very optimistic for the months to September. There is a slowdown in container exports due to a drop in consumer demand in the US, EU and UK markets.

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