Friday July 12, 2024

Freight rates surge on Chinese demand for containers

By Javed Mirza
May 11, 2021

KARACHI: As the Chinese demand for containers ramps up, there is a sharp surge in freight rates to hurt profitability of Pakistani exporters, it was learnt on Monday.

All Pakistan Shipping Association (APSA) Chairman Asim Siddiqui said the freight rates for containers shot up by around 300 percent, and this is the case in the entire region.

“China is the only country in the world posting high growth and their demand for containers to export Europe and America has increased. Moreover, the Chinese exporters are willing to pay higher rates, so the shipping companies are deploying their resources to China,” Siddiqui said.

Ikhtiyar Baig of Baig Group of Companies said there is a shortage, because not many containers are coming to Pakistan. Due to Covid, the cycle has not established.

Baig said the exporters have to pay $4,500 for a 40ft container to Germany, which used to be $1200. “Country’s exports are flourishing and will cross $2.0 billion/month this year but the exporters would not make profits as their margins are being eaten up by the cartel of shipping lines.”

Baig said the exporters had talked to Adviser to the Prime Minister for Commerce and Investment Minister Razzak Dawood and urged the ministry to take measures in breaking the monopoly and cartelisation of the shipping lines.

Siddiqui said freight rates in the region are directly linked with China and rates in China are up. “Lines are moving their containers to China because they are getting higher rates.”

He however, negated the impression that there was any shortage of containers. “There is no shortage of empty containers, just the rates are high.”

Siddiqui said lockdown in Europe was another factor for limited supply of empty containers because the goods exported had not been consumed. “Europe was closed for the last six months and containers were not coming back. Once the Europe’s retail sector opens, the containers piled up there would be emptied and return.”

An industry official said the freight for shipment to the US is hovering around $6,000/container, which used to be around $2,000 few days ago. “It is now shipping companies’ turn to make the money,” a freight agent said.

“Due to deteriorating situation in India and Bangladesh, most of the textile and garments orders had moved to Pakistan and the industry is running on full capacity.”

The official said export shipments are piling up as there is a shortage of containers and higher freight rates.

Pakistan’s importers and exporters pay $5-6 billion every year in international freight charges to the shipping companies. International Federation of Freight Forwarders Association outgoing president Babar Badat believes that freight charges would stay at current levels and if they actually came down, they would not fall as low as they were during the pre-pandemic times.

Badat said many shipping companies have gone bankrupt around the world and many others have been operating in losses for about three to four years. “The world has enjoyed trade at a low freight in the pre-pandemic days.”

Trade bodies claim the regional and international shipping companies have formed a cartel to impose exorbitantly high freight charges in a bid to cash in on the post-COVID situation.