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Business News/ Companies / Container cargo exports to US see 6% decline in 2007
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Container cargo exports to US see 6% decline in 2007

Container cargo exports to US see 6% decline in 2007

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Bangalore: India’s exports to the US in steel containers fell 6% in 2007 over the previous year in the wake of the slowdown in the world’s biggest economy.

With the credit crisis in the country deepening, 2008 could be worse for India as far as exports to the US are concerned. Already, the slowdown has forced some companies to suspend shipping services from the country to the US and freight rates have fallen nearly 50%.

The worst hit are India’s garment exports, which have fallen significantly. Apart from garments, India exports iron and steel, carpets, mats, rugs, groceries, stones, chemicals, furniture and electronic goods to the US. The only positive development for container shipping firms operating from India is that the worst could be over in terms of freight rates.

“Freight rates to the US will not go down further. (But) if the rates fall further, we will have to close shop because it will become unviable for shipping firms to operate on this sector," said an executive with German container shipping firm Hapag-Lloyd, who did not want to be named.

Freight rates to the US recently jumped by about $200-250 (Rs8,020-10,025) per twenty foot equivalent unit, or TEU, to $1,300 per TEU, mainly riding an increase in bunker (ship fuel) prices. A TEU is the standard size of a container and is a common measure of capacity in the container business.

In 2006, India’s exports to the US in cargo containers touched 189,249 forty foot equivalent units, or FEUs. These were estimated to grow by 10% to about 210,000 FEUs in 2007. An FEU is twice the size of a TEU.

However, that did not happen. Indian exports dropped 6% to 177,828 FEUs in 2007, according to data available with The Journal of Commerce, a US government publication. The exact quantum of drop in volumes in 2007 over 2006 works out to 11,421 FEUs.

The slowdown in demand resulted in a fall in shipping freight rates. The freight rate of $1,300 per TEU for moving a 20ft cargo container from India to the US east coast is about half of the $2,500-2,600 per TEU that was billed two years ago.

This has forced some shipping firms to discontinue services from India to the US. For example, IDX Service, a direct weekly service run by a consortium of four shipping firms from India to the US east coast since 2005, decided to shut down in January and deploy the ships on more lucrative sectors in South-East Asia.

Container shipping lines are also increasingly deploying ships on routes to other Asian destinations, including China, and Europe. “These sectors are growing strong," said an official with Japan’s K Line, who did not want to be identified.

Europe is an attractive destination, too, with container cargo traffic from India growing by nearly 30% over the last year. As a result, container ships plying to Europe are going full and freight rates on this sector have increased significantly. The freight rate to Europe is $1,500-1,600 per TEU.

IDX Service was operated by India’s biggest shipping firm, the state-owned Shipping Corp. of India Ltd (SCI), Zim Integrated Shipping Services Ltd, Orient Overseas Container Line Ltd and Emirates Shipping Line FZE.

The service connected Jawaharlal Nehru Port, India’s biggest container port in Navi Mumbai, and ports in Tuticorin, Chennai and Mundra with the US east coast.

The slowdown in the US economy has also led to overcapacity in the India-US east coast sector, which accounts for 70-75% of India’s exports to that country. “There is no growth in the Indo-US trade," said an SCI executive, who did not want to be identified.

Maersk Line runs a direct service called MECL 1 from Jawaharlal Nehru Port to the US east coast. Hapag-Lloyd, APL, CMA CGM, Mac Andrews, NYK Line and Mitsui OSK Lines together run a direct weekly service called Indamex on the same route. Yet another direct weekly service in that route called Sina is run by Hanjin, K-Line, Yang Ming Line and UASC.

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Published: 27 Mar 2008, 12:49 AM IST
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