Falling freight rates: Shippers are suffering from the subdued export demand

The nearly 40 percent fall in container prices has not cheered the shipping and exporting community. The majority of them say that the fall in interest rates comes at a time of subdued demand across all markets.

Industry sources pointed out that average container prices in the country fell to US$2,088 from US$3,288 in March.

Rates have skyrocketed during the pandemic, coupled with a shortage of containers, hurting profits at several companies. The situation has improved over the past year due to the availability of sufficient containers.

Alex K Ninan, President of the Seafood Exporters Association of India (Kerala Region) said: “It (the business) is unlikely to benefit from falling freight rates in the wake of declining exports due to a slowdown in overseas markets.” This has increased the transport of export cargo disrupted many destinations in the US and Europe. In Corona times, the shipping costs were 25,000 US dollars, so that many shipping companies were able to post profits. A similar situation is expected once demand improves.”

“It is true that container freight rates have fallen dramatically, with the 40ft freight rate to Felixstowe reported as US$6,000 for 2022 to US$700 in May 2023. Likewise, freight rates to Norfolk and New York have dropped from $12,000 in 2022 to $2,500 in May 2023.” Unfortunately, the coir industry has not been able to capitalize on this unexpected gain,” said Mahadevan Pavithran, a top coir exporter in Alappuzha.

A 50 percent drop in orders has made it impossible for coco exporters to take advantage of cheap freight rates, especially amid a strong dollar and stable commodity prices, including low coco twine prices, he said.

Now there is an overbought position in the market and the added impact of high inflation and a war-torn Europe that has resulted in one of the worst years for coconut exports, he said.

main reasons

Binu KS, president of the Kerala Steamer Agents Association, said the recent drop in cargo volumes could be attributed to many factors.

The disrupted supply chains and shipping schedules were a major cause of the imbalance in the carton supply situation during the pandemic, while demand in the US and European markets fell drastically. The Ukraine war also had a negative impact on demand from across Asia for Europe.

“Now we are experiencing a situation where we have enough space on the ships and an oversupply of containers, which forced shipping companies to start a price war, which led to a drop in cargo. This may continue for another three to six months,” he added.

According to Prakash Iyer, chairman of the Cochin Port Users Forum, recessionary trends in the US and European markets have forced shipping companies to offer lower fares to fill the cargo.

However, the situation is not conducive to further export orders. This downward trend will continue for a few more months and freight volumes are expected to recover by the end of the year.

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