The sharp fall in global freight rates from a high of $18,000 to $750 in various sectors such as the US and Europe has not brought any cheer among businesses in export-import (EXIM) trading.
The EXIM sector is unable to take full advantage of the situation due to the overall dullness in demand due to the global economic slowdown.
The Covid situation forced shipping lines to hike freight costs between 2020 to mid-2022 to cover up their expenses due to vessel delays, holding up of containers, etc.
Now, the rates have started sliding since January even below the pre-Covid times. The southward movement to as low as $750 in the Europe sector started benefiting customers, exporters, and importers, said Prakash Iyer of Cochin Port Users Forum.
Despite the common feeder prices still ruling higher, Iyer said shipping lines are offering lower rates to exporters to withstand the competition.
Recession plays spoilsport
Mahadevan Pavithran, a coir exporter in Alappuzha, said the industry would not be able to benefit from the lower ocean freight rates, thanks to the recession across global markets and the Russia-Ukraine conflict. The drop in coir exports were around 30 percent which is expected to continue for the whole year.
Coir business, he said, was down by 30-50 percent and the priority is to survive in this lean period by focusing on niche markets with product specialization and quality.
The industry is sustaining now only because of the focus shift of China from procuring coir pith from India to Vietnam and Indonesia.
This has led to the dropping of coir pith prices in the domestic market, enabling the industry to keep afloat during this phase. The rise in demand for upholstery business has facilitated China to look at proximity centers for purchase, he said.
Impact on the seafood sector
Seafood exports are also muted on account of subdued sales across the US and Europe. Alex K Ninan, president of the Seafood Exporters Association of India – Kerala region, said the export business was down by 15 percent due to the US recession and the case is similar with Europe.
With the availability of sufficient stocks in supermarkets, there is a considerable reduction in purchases even for the ensuing Easter season.
According to Prakash Namboodiri, All India Spices Exporters Forum, the declining freight rate would benefit customers in a big way. But the overseas market, especially the US and Europe, is not so conducive due to the recession, forcing consumers to buy hand to mouth. The growing regulatory concern due to pesticide issues in Europe is also posing a problem.
Source: The Hindu Business line
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