Freight Costs, Container shortages threaten India’s exports: GTRI

To address these challenges, the Global Trade Research Initiative (GTRI) recommended that India implement several strategies to boost domestic container production, enhance the role of local shipping companies, promote the use of domestic containers, and strengthen local shipping firms.

“India can lower its risk of global supply chain disruptions by boosting domestic container production, encouraging the use of locally made containers, and increasing the use of Indian shipping companies for transporting goods,” GTRI Founder Mr. Ajay Srivastava said.

Between 2022 and 2024, shipping rates for a 40-foot container have fluctuated significantly. It said that in 2022, the average cost was $ 4,942 due to the lingering effects of the covid pandemic, while by 2024, the rate had stabilized around USD 4,775, it said adding that these rates are still significantly higher than pre-pandemic levels, where the cost was $ 1,420 in 2019. “The elevated freight rates reflect the persistent supply chain challenges that continue to burden global trade,” Mr. Srivastava said.

He added that there had been unverified reports of China hoarding containers to maximize its exports to the US and Europe ahead of potential trade restrictions and a hike in duties on solar panels, electric vehicles, steel, and aluminium manufactured by Chinese firms located in China or elsewhere like in ASEAN (Association of Southeast Asian Nations) countries. However, the real container shortage issue likely stems from broader logistical inefficiencies like port congestion and Red Sea disruptions rather than deliberate stockpiling, Mr. Srivastava said. “Indian exporters may soon face another disruption if the US-China trade war escalates in the coming months,” it said.

The global container shortage, first triggered by the COVID-19 pandemic, may soon reemerge, causing severe difficulties for Indian exporters.

“To minimise Trade Disruptions Due to US-China Trade War Escalation and other geopolitical events, India must invest in Container Production and Domestic Shipping,” it added.

It also said that India’s dependence on major shipping hubs and foreign carriers significantly increases costs and risks.

“To cut costs and minimise risks, three key logistics challenges need urgent attention. First, 90-95 per cent of India’s cargo is transported by foreign shipping liners, giving them control over access and freight rates, limiting India’s ability to manage costs and schedules,” it suggested.

The ownership of shipping containers is dominated by major shipping lines and leasing companies with negligible share of India but significant investments and policy support are required to scale up container production.

In addition to container shortages, India is heavily dependent on foreign shipping companies for its international trade. About 90-95 per cent of India’s total cargo is carried by foreign lines, such as Maersk, MSC, and COSCO. Indian shipping companies, led by Shipping Corporation of India (SCI), handle only about 5-10 per cent of trade by volume, it said.

“This reliance on foreign shipping exposes India to rising freight costs, geopolitical risks, and logistical uncertainties. With escalating trade tensions between the US and China, and the increasing cost of shipping, India must urgently develop its domestic shipping industry to handle a larger share of its export and import cargo,” it added.