“Freight costs have soared to USD 400-500 per 20ft container and USD 600-700 for 40ft container shipments to the UK,” Debojyoti Basu, vice-president of the Calcutta Customs House Agents’ Association
Kolkata:
Exports from Kolkata port, a gateway to eastern India, are facing several challenges including, geopolitical tension, a government-imposed rice export ban and skyrocketing ocean freight costs, which could lead to a slowdown in trade activities, officials said on Sunday.
Key export items, like engineering goods, shrimp, and rice, have been impacted in recent weeks, they said.
Freight charges, especially for West Coast destinations, have surged by 30-50 per cent since December last year due to the escalating conflict in the Red Sea, they said.
Most of the major shipping liners are “rerouting vessels around the Cape of Good Hope to avoid the Red Sea, causing significant delays of 14-20 days,” one of the officials said.
Shipping through this alternative route resulted in higher freight and insurance costs, further squeezing exporters’ margins, he said.
This sudden hike has “disrupted cost structures and led to the temporary hold-up of several export consignments”, he said.
“Freight costs have soared to USD 400-500 per 20ft container and USD 600-700 for 40ft container shipments to the UK,” Debojyoti Basu, vice-president of the Calcutta Customs House Agents’ Association, told PTI.
“Further hampering exports is due to the recent ban on white and broken rice and 20 per cent export duty on parboiled rice by the government. Kolkata port used to witness around 2,000 containers of parboiled rice exports, primarily to Southeast Asia,” he said.
He also said soaring freight costs and administrative delays are squeezing profits and forcing some exporters to withhold orders.
India’s export control removed 9 million metric tonnes of grain from the international market since August, significantly impacted global prices.
“Our company’s overall rice export has decreased by more than 33 per cent. This significant decline can be attributed to two factors. First, the total ban on non-basmati raw rice exports, a key product from West Bengal, has severely impacted our sales.
“Second, the 20 per cent export duty on non-basmati parboiled rice, coupled with increased transportation costs due to the Red Sea issue,” said Suraj Agarwal director of Villa Group, a leading rice company.
These have resulted in a loss of over USD 80 per tonne in the last 20 shipments, he claimed.
“This has made us uncompetitive and led to a 50 per cent reduction in export orders and significantly narrowed our profit margins. The export business of non-basmati rice cannot sustain for long, if these factors do not change in the next 6 months,” he said.
Engineering Export Promotion Council (EEPC) India former chairman Rakesh Shah said, “The disruption in the Red Sea, a crucial global shipping lane, is driving up short-term container shipping rates and impacting timelines.
“Shipping delays are jeopardising adherence to Tariff Rate Quotas (TRQs) in Europe, potentially harming export opportunities,” he said.
The impact of the ongoing crisis around the Red Sea shipping route, which accounts for 50 per cent of the country’s exports and 30 per cent of imports last fiscal, will vary depending on the industry, according to a report.
The Kolkata port authorities, however, claim that they haven’t observed any substantial impact on export volumes yet.
Syama Prasad Mookerjee Port, Kolkata, chairman Rathendra Raman recently said the SMP anticipates just a 5 per cent growth in traffic for the current fiscal year 2023-24 owing to geopolitical headwinds.
He said the port may conclude the year with 68 million tonnes of cargo traffic.
In 2022-23, the Kolkata Dock System and Haldia Dock Complex achieved double-digit growth of 12.5 per cent over the previous fiscal year, handling 65.66 million tonnes of cargo.
No disruption in oil flows, only freight up, says HPCL head
The ongoing attacks on shipping vessels by Houthi militants in the Red Sea have not impacted the flow of crude oil to India but freight has gone up due to rerouting via the Cape of Good Hope, Hindustan Petroleum Corporation Ltd (HPCL) chairman Pushp Kumar Joshi said.
India, the world’s third-biggest oil importer, gets a bulk of its Russian supplies through the Red Sea. Russian supplies made up for over 35 per cent of India’s total crude imports in 2023, amounting to 1.7 million barrels per day.
Russian ships and cargoes are not being prime targets of the attacks at this stage however rerouting of ships around the southern tip of Africa instead of transiting through the Suez Canal and Red Sea has led to ships taking longer voyages, resulting in the shortage of ships and rise in freight charges.
HPCL meets 44-45 per cent of its crude oil needs on term contracts with national oil companies such as those in Saudi Arabia and Iraq. The remaining is on the spot or from the current market, he said.
“Term crude has not been impacted (due to the Red Sea crisis),” he said, adding the spot imports are on DES basis where the shipping is arranged by the supplier.
“Crude oil supplies have not seen any disruption as of now. This has definitely impacted the freight rates and freight rates have travelled northward.”
“So far as supply is concerned, I am quite confident that supply requirements are being met. We also have to see how this situation unfolds in the next few weeks, basis that we will have to take a call but as far as the procurement side is concerned, I am already in a comfortable situation till March 31 and two weeks of April,” he said.
Joshi said HPCL has tied up both term and spot supplies including opportunity crude till mid-April. “We are not experiencing any disruption there.”.
While the supplies are not being impacted, the rerouting of ships could inflate insurance costs and crimp refining margins.
Shippers are avoiding the Red Sea and Bab al-Mandab Strait after a US-led coalition struck Iran-backed Houthi militants in northern Yemen. This however has impacted diesel exports to Europe. Longer voyages have hit diesel cargo cost, which has increased by USD 850,000-1 million.
Due to the rerouting of a voyage through the Cape of Good Hope instead of going through the Suez Canal, shipments from India to the US will take an additional 10-14 days, while shipments from Europe/the Mediterranean will take 20-25 days.