The government has stepped in to resolve the container shortage situation to ensure adequate availability for exporters, with the Shipping Ministry and some other line ministries, like the Railways, working on a series of policy interventions.

During internal discussions across Ministries, it was acknowledged that the “front loading of shipments” by China to circumvent US tariffs has worsened the problem of container availability, sources in the know told businessline. 

Among the solutions, the Shipping Corporation of India (SCI) is planning to charter at least five more container ships to significantly increase capacities, while the Jawaharlal Nehru Port Authority (JNPA) is setting up a centralised coordination system to manage the use of empty containers at major ports across India. The Railway Board has “significantly” reduced storage and handling charges (of container) at ports. 

“The container shortage problem has been further complicated by Chinese exporters who have been front-loading shipments to circumvent US tariffs. This rush in China to preemptively export goods before additional tariffs take effect has led to a sudden surge in demand for containers, which in turn has strained global container availability,” a Shipping Ministry official said. 

In maritime parlance, front loading means to assign costs or benefits to the early stages of (such as a contract, project, or time period). These new tariffs on Chinese exports to the US range mostly from 25 to 100 per cent. 

“While some of the tariff increases go into effect immediately, most of these are scheduled for 2025-2026, which has led to China hoarding containers,” another exporter said. 

In response to the proposed phasing-in of tariffs, exporters are front-loading their shipments to the US, some even sending empty containers to China to be filled and dispatched before the tariffs take effect.

Indian exporters say that a significant shortage in container availability was witnessed around July-August, just ahead of the first set of tariff hikes kicking in for China. 

“After a decline since August, spot rates ex-China increased this week, and we expect this trend to continue,” Drewry’s said in its weekly container freight report. 

Proposed solutions

The SCI recently added a new container vessel SCI Delhi with a capacity of 9000 TEUs (twenty equivalent units) and put it into the Europe Service in tie up with MSC. 

It’s current fleet size is 59 (across categories like tankers, bulk carriers, liners & offshore supplies). 

Shipping lines have supposedly bypassing several Indian ports due to longer voyage times and increased route lengths, which in turn affects container availability

Accordingly, the Ministry has also come up with a draft notification on regulations for Vessel Sharing Agreements (VSAs). Under this, the container shipping industry can likely be exempted from India’s antitrust law for a period of three years on the condition that at least 5 per cent of the total space available within such pacts is provided through Indian flagged vessels and at least 5 per cent of the total space available is allocated to Indian non-vessel operating common carriers (NVOCC).

“Stakeholders’ comments have been received, and the compilation is underway on this,” another Ministry official said. 

Once the JNPA’s proposed centralised coordination system for empty containers is set up, it would help create a comprehensive inventory of available empty containers and ensure their distribution, the official added. 

A Railways official said, the Board has reduced storage and handling charges for containers exceeding 90 days by 70-80 per cent at several major ports. “This measure could help lower freight costs apart from enhancing availability,” he said. 

Container Rates Up 

The Drewry world container index increased 4 per cent to $ 3,213 per FEU (forty equivalent units) for the week ending October 31, which is 69 per cent below the previous pandemic peak of $ 10,377 in September 2021; but 126 per cent more than the average 2019 (pre-pandemic) of $ 1,420.

The average year-to-date composite index is $ 4,017 per FEU, which is $ 1,178 higher than the 10-year average of $ 2,839 (inflated by the exceptional 2020-22 Covid period).

Freight rates from Shanghai to Genoa went up by 11 per cent to $3,648 per feu and those from Shanghai to Rotterdam increased 8 per cent to $3,396 per FEU. 

Rates from Shanghai to Los Angeles also increased 1 per cent to $4,839 per FEU. 

Meanwhile, rates from Shanghai to New York, New York to Rotterdam and Rotterdam to New York remained stable, the weekly report said. 

India relies heavily on foreign carriers, with 90-95 per cent of its cargo transported by foreign shipping liners. 

“This dependence increases costs and risks, as foreign liners control access and freight rates, limiting India’s ability to manage schedules and costs,” another Ministry official in the know said.

Post-pandemic concerns 

Post-pandemic, the elevated freight rates reflect ongoing supply chain challenges.

Freight costs for Indian exporters shipping goods to Europe and the US have more than doubled in the past year.

Due to disruptions in the Red Sea and other geopolitical issues, many ships have opted for longer routes via the Cape of Good Hope resulting in increased freight costs.

Broader logistical inefficiencies, such as port congestions have also cropped up.

By mid-2024, the re-routing of ships from the Red Sea and the Panama Canal increased global demand for ships by 3 per cent and demand for container ships by 12 per cent compared to what it would have been without this factor, the United Nations Conference on Trade & Development (UNCTAD) said in a recent report.

In 2023, seaborne trade grew by 2.4 per cent to 12.3 million tonnes (mt), beginning a recovery after 2022. This year, UNCTAD predicts a 2 per cent year-on-year increase (volume-wise). 

Large port hubs such as Singapore and major Mediterranean ports are facing added pressure due to the growing demand for transshipment services following a change in shipping routes.

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