Peak season looks weak, but carriers impose surcharge

Peak season looks weak, but carriers impose surcharge
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First Published: Thu, Aug 27 2009. 01 03 AM IST

Covering costs: The peak season surcharge is typically levied by container carriers from August to October. Ashesh Shah / Mint
Covering costs: The peak season surcharge is typically levied by container carriers from August to October. Ashesh Shah / Mint
Updated: Thu, Aug 27 2009. 01 03 AM IST
Bangalore: At least three major shipping firms carrying container cargo from India to the US will start collecting a peak season surcharge of $320-500 (Rs15,600-24,400) from September to November though demand for Indian-made goods in the world’s biggest economy continues to be depressed.
APL Ltd, the container-shipping unit of Singapore government-owned Neptune Orient Lines Ltd, will collect a peak season surcharge from 6 September to 30 October; CMA-CGM SA, the world’s third biggest container shipping firm, from 14 September until further notice; and German container shipping firm Hapag Lloyd AG from 15 September till the end of November, according to the companies.
Covering costs: The peak season surcharge is typically levied by container carriers from August to October. Ashesh Shah / Mint
The peak season surcharge is typically levied by container carriers during the peak months of August to October, when there is a surge in demand for finished goods from retailers in the US to meet sales for Christmas and Thanksgiving Day. Peak season cargo movement from India to the US starts from July-August and stretches up to October-November for goods that have to be in stores by December.
India’s exports to the US mainly comprise garments, handicraft, iron and steel, carpets, mats, rugs, groceries, chemicals, furniture and electronic goods.
This year, container volumes in the traditional peak month of October is expected to be very weak, down 18.7% from October 2008 and off 25.2% from the all-time record peak of October 2006, according to a report by US-based IHS Global Insight and the National Retail Federation (NRF).
IHS Global Insight’s Port Tracker report has estimated that container cargo imports into the US in the second half of 2009 would decline 16.8% compared with a year ago, making for an anaemic peak shipping season.
This has not stopped carriers from enforcing a peak season surcharge on container shipments to the US.
India’s exporters aren’t convinced about the new levy.
“In a world caught in recession with volumes declining, shipping capacity piling up, and container space in excess, carriers are still finding it reasonable to charge a peak season surcharge, which questions the very logic of market driven prices,” said S.R.L. Narasimhan, secretary at Western India Shippers Association, an industry lobby group.
“The peak season surcharge is not likely to work this year,” said Apurva Jasraj, a partner at Mumbai-based freight broking firm M Jasraj and Bros. “The container volumes to US are abysmally low and ships are sailing at very low capacity utilization.”
Container carriers have defended the move. “While containerized trade in the first half of 2009 was much lower than (in) the previous year, we are seeing a significant strengthening in cargo volumes as we enter the summer season,” an APL spokesman said. “We expect this trend to accelerate during the upcoming busy period from late August through mid-October, as retailers replenish depleted inventory levels.”
However, he added that while demand had improved to an extent, freight rates remained at unsustainable low levels. “This jeopardizes our ability to cover costs and provide adequate services to meet increased customer demand during this period,” he said.
Currently, shipping a 20ft container from India to the US costs $1,300-1,400. For transporting a 40ft container, the cost is $1,700-1,800.
Unlike in earlier years, when peak season surcharge took effect from mid-June, this year it is being enforced from September till November because of the economic scenario, said an executive at Hapag-Lloyd. He did not want to be named.
Apart from the surcharge, both CMA-CGM and Hapag-Lloyd have announced a general rate increase of $400 for a 20ft container and $500 for a 40ft container on container shipments from India to the US, beginning 15 September.
p.manoj@livemint.com
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First Published: Thu, Aug 27 2009. 01 03 AM IST