Market Letters

India Market Update – Week 51, 2020

Improved market conditions appear to be benefiting ocean carriers trying to recover from earlier setbacks from earlier COVID-19 shutdowns. However, they are facing difficulty positioning equipment to the right locations to meet the dramatic swings in demand. Ocean carriers active in most trades out of India are increasingly reporting “stockouts” for empty containers amid slowing import flow and heightened export demand. As a result, shippers are beginning to see more emergency surcharges on top of the already high spot rates on key routings especially for US-bound cargo.

Additional challenges from a backlog of 50,000 TEU at the port of Colombo are causing chaos for South Asian transshipment cargo. The congestion at Sri Lanka’s Colombo port has led to excessive vessel back up as well as forced the rerouting of ships to other ports in the region. This bottleneck is impacting supply chains in neighboring India and Bangladesh and caused a spillover effect impacting vessel schedules out of key Indian terminals. Finally, adverse weather conditions (rain & wind) are adding to delays due to intermittent work suspensions.

Air Freight

Demand for air freight is high and expected to remain so throughout the remainder of December. As result, rates are on a similar upward trend for all outbound exports moving from India. The space situation is still tight at hubs with an average minimum 2 days waiting time at transshipment point including in CDG, AUH, DOH, DXB and HKG for connections to final destination. This is reflected in average transit times of 3-4 Days airport to airport.

Ocean Freight

Space and Equipment

Demand for both space and equipment remains high for US and European destinations. Unfortunately, space and equipment shortages are increasingly an issue with many carriers and is expected to be so for the immediate future.  Many mainline carriers have stopped accepting bookings to European and US destinations. Rates remain on the increase with all carriers and the market is seeing price hikes of more than 60%. Blank sailing have been announced by many Feeder and Mother Vessel operators.

Congestion across all gateway points including Colombo, Singapore and Busan have had an impact on rollovers of containers at hubs and resulting delay and significant increases in transit time. Space out of India is at a very critical point for US and Canadian destination across all the major gateway points. Currently transit time cannot be guaranteed for US and Canadian destinations and some carriers have stopped accepting bookings on these lanes.

Emergency Surcharges

In early December, MSC announced an equipment imbalance surcharge of $250 per container for all types of cargo shipped from India to the US and San Juan, Puerto Rico. According to industry sources other carriers are expected to follow. “We are anticipating similar surcharge notices from most of the lines,” a Mumbai-based freight forwarder told “Securing empty equipment has become a humongous challenge.”

Colombo and Transshipments

The capital of Sri Lanka has been under Covid-lockdown for the past couple of weeks and a labor shortage at the port’s container terminals has caused congestion since early October. Though operations have resumed at the port there remains a heavy backlog which is yet to be cleared and it is expected to continue for next couple of weeks. Feeder vessel sailings from Colombo to India have been badly impacted and delays are averaging more than 8 to 10 Days. Some liners have implemented blank sailing from Colombo to India due to these operational constraints. Freight rates have doubled out of Colombo and shippers are needing to book up to eight weeks in advance to get a slot. Rolled bookings are also and issue and some shippers have had cargo rolled up to four weeks in Colombo and two weeks in Singapore.

Domestic Transportation

The Indian Farmers Protest is expected to continue. Road entry for commercial trucks to Delhi City has been blocked and restricted by the farmers. Cargo movements to ICD’S and airports are badly affected.

We expect these challenging conditions to continue into early in the new year and likely beyond. As always, we strongly suggest to work with your suppliers and supply chain partners to continue to provide updated forecasts and arrange bookings as far in advance as possible.  Our sales and operations teams 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.