Bangalore: Cargo freight from India to the US has risen sharply as retailers in the world’s largest economy start stocking goods ahead of Christmas.
“Freight rates have risen by 25-30% after ocean carriers have inked new rate agreements with their big customers recently,” Gaurav Thakur, regional manager of north India, looking after ocean freight at the Indian unit of German freight forwarding firm Schenker Logistics, said.
The increase in fuel surcharge due to soaring ship fuel prices and introduction of a peak season surcharge of $300 (around Rs12,700) for moving a standard cargo container to the US from 15 June have also contributed to this, he said.
The peak season cargo movement from India to the US starts in May-June and stretches up to September-October as retailers stock goods for Christmas sales.
The rate for shipping a container to the US is currently $2,100-2,200, up from about $1,600-1,700 a few months ago. The rates, however, are still lower than the high of $2,500-2,600 seen in 2006.
India’s exports to the US mainly comprise garments, handicrafts, iron and steel, carpets, mats, rugs, groceries, stones, chemicals, furniture and electronic goods.
The recovery in rates on this sector has helped shipping lines such as CMA CGM SA, Hapag-Lloyd AG, APL Ltd, Mitsui OSK Lines Ltd and Hyundai Merchant Marine Co. Ltd offset the increase in ship fuel prices that now account for almost 75% of a ship’s operating costs, up from 20-25% a year ago, said an executive at Mitsui, who declined to be named as he is not authorized to speak to the media. “Higher ship fuel prices are eating into our profits. Our survival would be at stake if the rates don’t hold at this level,” he said.
The higher freight rates have also led a few container shipping firms to group together and start a new weekly direct service from August, connecting Jawaharlal Nehru and Mundra Ports with the US east coast ports such as Damietta, New York, Norfolk and Charleston.
The Orient Overseas Container Line Ltd, or OOCL, has teamed up with Hapag-Lloyd, CMA CGM and NYK Line to launch the Indian Subcontinent East Coast Express service. The new service replaces the IDX service that was suspended in January by four partners—OOCL, The Shipping Corp. of India Ltd, Emirates Shipping Line FZE and Zim Integrated Shipping Services Ltd.
Maersk Line Ltd, the world’s biggest container shipping firm, also runs a weekly direct service from Jawaharlal Nehru Port to the US east coast.
About 70-75% of India’s annual exports of 177,828 40-foot equivalent units, or FEUs, to the US go to the east coast and the rest to the west coast. An FEU is twice the size of a 20-foot equivalent unit, the standard size of a container, and an industry measure.
“The overall cargo container shipments from India to the US have grown by about 5-6% compared with the same period last year,” said a Hapag-Lloyd executive who requested anonymity.
India’s exports to the US declined 6% in 2007 compared with the previous year, due to a slowdown in the world’s largest economy. India exported 177,828 FEUs to the US in 2007, 6% less than 189,249 FUEs it had sent in 2006.