Market Letters

India Market Update – August 28, 2020

In the short term there is little good news to report coming out of India. Recent accelerated growth in US trade from India following the re-opening of the country in June has been severely impacted by structural and market driven reductions in transportation capacity. This has resulted in a supply side space crunch that is affecting India shippers and US importers alike.

Covid cases in India are increasing and now moving from the bigger cities to more remote areas of the country. At this time the lockdowns are being relaxed in a phased manner depending on regional impact. The Central Government has ended the nationwide lockdown with local state governments now responsible for implementation of regional state lockdowns. The majority of states are following Inter-state restrictions on movements of transportation, except the transportation of essentials goods. Working from home has been a struggle for many of our partners and carrier vendors in India and will continue. Most companies involved and logistics and supply chain have staff that are still working remotely, and internet infrastructure (capacity and availability) is limited. All of which is impacting communication, issue resolution, documentation, bookings, inspections at ICDs, etc.  On top of all this it is monsoon season and excessive rains are likely to impact all supply chain modes to some extent.

Air Freight

Resumption of all international flights from India is yet not cleared by the Aviation Ministry. Much like elsewhere in the world, passenger flights to and from India are still not operational. Demand for freighter space is high and capacity is limited. Expect air cargo space to continue to remain tight and freight rates to remain higher.

Ocean Freight

Several factors at play creating challenges for imports from India.

Carrier service reductions and blank sailings – Following the re-opening in June carriers reacted with many blank sailings impacting overall capacity. More recently some capacity from India has been reallocated by carriers to China and East Asia where demand continues to be strong and rate levels are higher than we’ve seen in decades… We expect capacity to slowly limp back to normal and will increase gradually over the coming weeks.

Empty container inventory – There continues to be an issue of availability of empty containers for export loadings. This is consistent throughout the entire country with the ICD’S (Interior Container Depots) significantly more burdened than at the ports. Container displacement and imbalances of inventory across ICD’s has resulted in shipper struggles and frustrations with securing empty containers and the return of loaded export containers across the ICD depot network. One solution for suppliers is using empty equipment secured from different ICDs. Though this can result in higher costs it may quite simply allow cargo to move.

Ports – Ports continue to operate at less than full capacity due to congestion and reduced staffing levels. Due to the monsoon season Mumbai (Nhava Sheva) and other western Region States are facing difficulties of water logging at ports, ICD ‘s and CFS facilities.

Domestic Transportation

Inter-state transport is now allowed but is subject to individual state restrictions.  Most truckers are not engaging in Inter-state truck movements due to the challenges and complexity of managing different policies implemented by individual states. As a result, domestic trucking charges have seen increases up to 25% in-comparison to the Pre-Covid time period.

We expect short term capacity issues to begin to slowly resolve but with freight rates likely to continue to increase in September. As always, we strongly suggest to work with your suppliers and supply chain partners to continue to provide updated forecasts and arrange bookings with a minimum of 2-3 weeks advance notice.  Our sales and operations team are working closely to provide solutions to overcome the capacity and equipment challenges in India as described above. Please contact your Laufer Sales and Operations Representatives for additional information and questions about how we can help.