Bangalore: The cost of shipping cargo containers from India to Europe has firmed up after major carriers raised rates from 1 July. They might hike them even further.
Rates on the India to Europe shipments have risen to about $500 (Rs23,850) for a 20ft container and around $900 for a 40ft container. The rates were about $280 for a 20ft container and about $450 for a 40ft container prior to July.
“The rate hikes enforced by the container shipping firms on the India-Europe sector was a success. Rates have firmed up after lines implemented the hike from 1 July,” said Apurva Jasraj, partner at Mumbai-based freight broking firm M. Jasraj and Bros.
Survival at stake: A file photo of Jawaharlal Nehru Port, Mumbai. Rates on the India to Europe shipments have risen to about $500 for a 20ft container and $900 for a 40ft one, and may go up further. Ashesh Shah / Mint
The cost of shipping a 20ft container from India to Europe had fallen by at least 70% to around $300 from about $1,100 in August last year amid declining international trade. The cost of hauling a 40ft container to Europe had plunged to about $450 from $2,500.
To restore rates to sustainable levels, carriers including Maersk Line, Mediterranean Shipping Co. SA, CMA CGM SA, Hapag-Lloyd AG and Hanjin Shipping Co. Ltd set out to enforce increases of $100 to $300 for a 20ft container and between $200 and $500 for a 40ft container from July.
Emboldened by the success of the July rate increases, shipping firms have reintroduced from 1 August the bunker adjustment factor (BAF), a surcharge on ship fuel, also known as bunker, which they had stopped collecting earlier this year when the Asia to Europe trade went into a freefall.
Copenhagen-based Maersk Line, the world’s biggest container shipping firm, has announced it would raise rates by $150 for a 20ft container and by $300 for a 40ft container to Europe from 1 September.
Mediterranean Shipping, the world’s second biggest container carrier, has said it would hike rates by $200 for a 20ft container and by $400 for a 40ft container from 1 September on trade lines from India to North Europe, the UK, west and east Mediterranean and black sea ports.
Many other carriers are expected to follow Maersk and Mediterranean Shipping by raising rates on the India-Europe sector.
“Our survival was at stake because the rates had reached rock-bottom levels. We had to do something drastic to prevent us from going under,” said an executive at Hapag-Lloyd, the world’s fifth biggest container shipping firm. He declined to be named because of company policy on speaking with the media.
“There was a degree of desperation among container shipping lines. The rate increase had to happen,” said Jasraj. He added that the effect of a number of container ships being laid up globally for lack of cargo and withdrawal of services has made an impact on freight rates.
The number of idle container ships has increased in the past two weeks to 10% of the world fleet as more vessels were removed from active service. A total of 520 ships are currently idle, representing 1.28 million standard containers, according to Paris-based container industry database AXS-Alphaliner.
Meanwhile, some container carriers are raising rates to the US, where the costs are currently hovering at $1,300-1,400 for transporting a 20ft container. Beginning 10 August, French firm CMA CGM, the world’s third biggest container shipping carrier, and Hapag-Lloyd have announced a rate increase of $400 for a 20ft container and $500 for a 40ft container to the US.
On Thursday, Maersk Line announced it was raising rates by $250 for shipping a 20ft container from India to West Africa, beginning 1 September.