The market outlook for container carriers operating on India-Europe trades appears to be darkening with no let-up seen in the freight rate erosion. Average rate levels on the trade lane have hit new lows over the past week, compared with the averages reported earlier this month.
According to market sources, booking rates from Nhava Sheva (JNPT) or Mundra in India to Felixstowe or London Gateway in the United Kingdom have slumped to US$550 per TEU and US$600 per FEU, down from US$650 and US$700 two weeks ago.
Indian export rates to the Mediterranean have also cooled, down to US$650/20-foot box, from US$750, and US$600/40-foot, from US$700.
The persistent rate erosion reflects heightened cargo pressure carriers are facing to fill vessel capacity, which they had significantly expanded to meet stronger-than-expected cargo flows following pandemic-induced demand swings.
With no hopeful signs for carriers to halt the slide or prop up rates, it remains to be seen if their intended freight-all-kinds (FAK) rate increases from early August will yield any gains. MSC, CMA CGM and Hapag-Lloyd have already issued trade notices regarding the scale of increases they will be implementing.
“In a continued effort to provide our customers with reliable and efficient service, CMA CGM announces an increase in freight-all-kinds (FAK) rates ex-India & Pakistan to North Europe and the Mediterranean,” the Marseille-based carrier said.
But the market presents significant challenges. Indian goods exports have decreased substantially in recent months, with the decline rate by value hitting the most last month, down 22% year-on-year.
“Overall, June exports, along with Q1 2023-24 exports, have seen declines due to the slowdown in growth coupled with demand contraction across the globe,” said A Sakthivel, president of the Federation of Indian Export Organisations (FIEO).
Sakthivel added: “The slowdown comes in wake of higher energy prices contributing to curbing demand in Europe's largest economy and surging inflation.”
“One of the reasons for moderating the pace of growth in merchandise exports significantly in 2023 has been because of persistent geopolitical tensions, disruption in the global supply chain due to Russia-Ukraine war, monetary tightening and recessionary fears, which have continuously led to a fall in consumer spendings across the globe, especially in advanced economies.”
India's core export commodities, such as gems and jewellery, textiles and leather goods, are under serious stress in the face of demand headwinds in Europe and the United States. However, demand for some of the other Indian goods, such as electronics, drugs and pharmaceuticals, iron ore, fruits and vegetables, oil seeds, handicrafts (excluding handmade carpets) and coffee, continues to remain positive.
