Export Logistics
Even production no big issue, but shipping a nightmare
Post-Covid-19 lock down, most industries experience a surge in demand for products. Mobilising manpower and organising supplies from various vendors were no simple tasks. The challenge is from shipping and logistics.
Ships Are Not moving as per schedule. They often skip scheduled ports. Ships that used to take 6 weeks to deliver at the US east coast, now take 9 weeks. Shipping freights to Europe and USA have gone up by 50-150 per cent in the past six months.
Additionally, containers are in short supply. Export/import trade is crippled due to non-availability of containers. Exporters are often forced to resort to airlifting committed consignments to overseas customers at exhorbitant cost. Airlines have also jacked up charges in line with the surge in demand.
steep increase in costs…
Sea freight cost to USA (40’container) has gone up from USD 3800 to USD 5500 and for Europe (40‘container) from USD 1200 to USD 4200.
Air freight to USA has gone up from Rs 250/kg to Rs 450/kg and to Europe from Rs 120/kg to Rs 250/kg. ‘Flash’ service for guaranteed delivery in 2 days has gone up from Rs 450/kg to Rs 1000/kg.
There is a serious shortage of containers. They are scattered in various ports, some are empty and some are with loads pending clearance.
In the last four months India had cut down imports from China by 28 per cent and increased exports by around 30 per cent. Cutting imports has impacted circulation of containers.
Manufacture of containers in India was given up a few years back due to competition from China. Today China has emerged the largest manufacturer of containers but has jacked up the price; 20’ containers sold earlier at USD 1000 is now charged USD 4000.
Booking containers and shipping slots which needed an advance notice of two to three days, now requires 2-3 weeks. Still ships are not guaranteed sailing on time.
Port woes at Chennai…
Congestion at Chennai port crops up frequently and we suffer these, often at critical times. This is better handled at the Kattupally and at Ennore ports. At these ports containers are allowed to be unloaded pending customs verification. But not all shipping lines are calling at Kattupally/Ennore. Often, when more ships arrive into the Chennai port, there is the long line of trucks waiting to enter the port; the time varies from a day to a week. The queue of waiting container trucks at Chennai Port is often more than 10 km long.
Ripple effect…
In the past three months, major exporters of auto components have lost substantial sales volume, besides incurring heavy freight charges both sent by sea and air. There are more issues with inbound/outbound logistics than production! One of the exporters has incurred over Rs 500 lakh in the last five months on exhorbitant shipping charges and cost of premium deliveries. While the uncontrolled shipping costs are eroding margins, there is the greater risk of retaining customers due to uncertain/delayed deliveries as per commitments.
From a senior executive in leading component exporter.
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