Exporters hit by US freight spike

Engineering exports to the US have been impacted following over 50 per cent jump in the box rate by major foreign shipping lines operating particularly from Bay of Bengal ports.

The rate has gone up by almost $1000 per container from May 1 in the form of general increase in freight rate and hike in bunker surcharge.

This has put all major exporting houses and manufacturing companies with exposure to the US in big spot of bother.

"The export to the US has come to a standstill from east coast ports since the rate has gone up exponentially. Exporters were at the mercy of foreign liners who have formed a cartel and jacked up the price.

"Shipping Corporation of India has not come to rescue the exporters," Ravi Sehgal, regional chairman (east) of Engineering Export Promotion Council said.

While value added items or high value cargo like medicine and chemicals were able to absorb the rise, low value items like castings and forging were hit.

"Value of most of the engineering goods (casting and forging) vary between $ 7000- $ 9000. So the rise comes to 15 per cent of the item exported. The freight element alone was out-pricing products from the eastern ports in the US market," B N Agarwal, deputy vice chairman of EEPC said.

Prakash Thakar, chairman of FIEO, eastern region also admitted the phenomena would hit export from this region.

"The rise is steep and exporters are left with little option but to bear the burden," Thakar said.

While the total container export out of Kolkata is pegged at 40,000 per annum, EEPC alone does over 7,000 a year. Some of the major foreign shipping lines operating out of Kolkata are APL, P&O, Maerskline, Evergreen, Yang Ming Line among others.

The freight rate from Kolkata to US west coast stood at $1200 (all surcharge included) per container, which has increased up to $2175. The same for US east coast has gone up to $1300 to $2175. Both rates include bunker surcharge of $175.

Exporters are worried as the shipping lines are planning another round of increase of $225 from June 15 as peak season surcharge. This will continue till October 31.

While the rise is a national phenomenon, the problem of eastern region is compounded as no mother container vessel calls either at Kolkata or Haldia due to low availability of draft.  Exporters ship their consignment from here through feeder vessel to Colombo or Singapore.

Foreign shipping lines complain there is not enough import happening to Kolkata and they have to bring empty containers to help export. This has added to the cost.