Bangalore: Cargo ships sailing between India and the US are fully loaded and freight rates have risen in recent months, indicating that the financial turmoil in the world’s biggest economy is yet to take a toll on India’s exports to that country.
“Ships are going full with exports to the US and coming back full with imports from that country,” said A. Chopra, senior vice-president, container services and marketing at state-run Shipping Corp. of India Ltd, or SCI.
India’s container cargo shipments to the US east coast grew by 10% between January and July this year, compared with the same period last year. However, exports to the west coast declined by 14% in the period, said an executive with K Line America Inc., a subsidiary of Japan’s Kawasaki Kisen Kaisha Ltd.
“Since (the) US east coast is the larger market for India, the container cargo trade between India and (the) US is still positive,” said the executive, who did not wish to be identified.
K Line operates a weekly direct service—Singapore India Asia Container Service, or Sina—connecting Jawaharlal Nehru Port, India’s busiest container handling port in Navi Mumbai, with New York, Norfolk and Charleston ports on the US east coast.
India exports about 150,000 forty-foot equivalent units, or FEUs, a year to the US east coast, while the market to the west coast is about 45,000 FEUs a year.
An FEU is twice the size of a twenty-foot equivalent unit, or TEU, the standard unit to count containers of various lengths and describe container ship or terminal capacity.
SCI’s Chopra said exporters now have to wait for at least a month to ship their cargo to the US.
“Shippers looking to ship cargo to the US earlier had a choice of shipping lines to choose from. But today, they have to beg shipping lines to get space,” he said.
In March this year, SCI and its partners, Orient Overseas Container Line Ltd, Emirates Shipping Line FZE and Zim Integrated Shipping Services Ltd, suspended its weekly direct service IDX to the US east coast on waning demand and overcapacity in the sector.
Due to an economic slowdown in the US, India’s exports to the country fell 6% in 2007 at 177,828 FEUs, as against 189,249 FEUs in 2006.
Logistics firms, however, said the recent trend did not suggest exports to the US are growing.
One reason for the current demand could be that shipments currently taking place are those that were booked a few months ago, said the K Line executive.
Industry representatives say the rise in demand for space on ships and the jump in ocean freight rates could be largely attributed to the closure of the IDX service that operated with eight ships.
“When capacity is taken out of a trade sector, there will be a rise in freight rates,” said an executive at German container shipping firm Hapag Lloyd AG, who requested anonymity.
“When IDX was operating, the ocean freight rate to the US east coast was about $900-1,000 (Rs41,220-45,800 now) a TEU. Since then, the average freight rate has climbed to about $2,000 a TEU,” SCI’s Chopra said.
“At that time, we felt it was not a viable service. Moreover, there was no return cargo from the US. As a result, 60% of our ships used to come empty from the US,” said Makarand Sardesai, vice-president of operations at Zim Integrated Shipping Services (India) Pvt. Ltd.
Chopra said the scenario has changed since IDX stopped plying in March.
Currently, there are four direct weekly sailings from Jawaharlal Nehru Port to the US east coast, including the one run by Sina.
Shipping executives say the troubles in the US and their impact on India’s exports will “not immediately show”.
“We will have to wait and watch for a couple of months as retailers in the US will plan their orders on the buying pattern of consumers in that country. This will take some time to show up,” said an executive at South Korea’s Hanjin Shipping Co. Ltd.