The shipping problem is the result of the world’s largest importing and exporting countries’ uneven post-COVID-19 economic recovery. Over 34 million TEU of container capacity is available globally, yet these containers have been stacking up in the wrong place for months. Exporters and importers pay premium charges to shipping companies in addition to freight costs to obtain a container.
The shipping sector is the most important enabler of globalisation and the backbone of worldwide trade. According to the United Nations Conference on Trade and Development (UNCTAD), marine transport accounts for over 80% of world trade volume and over 70% of international trade value. MSMEs contribute nearly 25% of the US$ 18 trillion marine trade, according to a report. Since the commencement of the COVID-19 pandemic and the associated economic recession, the Suez Canal blockade in March 2021 has highlighted many challenges facing the shipping and logistics business. It has been observed that this sector has been experiencing a more serious and broad crisis.
MSMEs account for more than a quarter of the world’s $ 18 trillion marine trade.The worldwide supply chain has been completely disrupted.Because of the scarcity of shipping containers, meeting buyer demand has grown difficult.While every exporter and importer suffered the effects of the economic downturn to some extent, the MSME traders of the world were the hardest hit.The worldwide supply chain has been thrown off. Because of the scarcity of shipping containers, meeting buyer demand has grown difficult.
Whereas every exporter and importer suffered the effects of the economic downturn to some extent, the MSME traders of the world were the hardest hit. The worldwide supply chain has been thrown off. Because of the scarcity of shipping containers, meeting buyer demand has grown difficult.Even after receiving a container, the exporter must pay enormous ocean freight fees never before seen. The Indian exporting business works on slim profit margins, and the recent increase in freight prices has slashed those margins to the point where survival has become difficult.
Due to a shortage of shipping containers, freight costs have risen dramatically in the last year, reaching all-time highs. Drewry’s composite World Container Index (WCI), a global index for container spot market freight costs on all main routes, peaked at US$ 8796 on July 8, 2021, up more than 450 percent since the coronavirus emerged in December 2019.
Multiple maritime liners around the world have begun to witness a drop in their monthly revenues, with predictions of a greater drop in the following months. Empty containers in areas like America, which is one of the top importers, were not being picked up as a result of the reduced trade activity, despite the fact that they were desperately required in Asia. With the decrease in instances, China swiftly recovered, and in March, it restarted exports and began delivering its packed containers. Once these containers arrived at their destinations, however, social distance and covid limits among dockworkers resulted in longer shipment processing times. As a result, there was a backlog of claimed cargo at ports in importing countries such as Europe and North America, exacerbating the container shortage problem.
In a seminar organized in JIMS Kalkaji in collaboration with FIEO,various speakers discussed the problems faces by Indian exporters and the strategies to negotiate the situation suggesting the way forward.
These difficulties were became prominent in March 2021, when the grounding of the Ever Given shipping vessel shut the Suez Canal. This blockade led to the overall supply chain disruption by causing massive traffic bottlenecks and delays, as well as preventing nearly 300 ships from sailing.
Container prices have risen by 300 percent in India, aggravating the situation for Indian MSMEs trying to run their companies in the midst of the pandemic. The absence of containers raises logistical costs and limits the SME’s ability to complete orders, resulting in a payment delay. If things stay the same, economies will likely look for other ways to cut their losses, such as shorter trade routes.
This could wreak havoc on MSMEs already struggling to recover from the pandemic’s economic impact. Furthermore, assume that transportation costs continue to rise at this rate. Furthermore, the Suez Canal situation has intensified the difficulties that Indian ports face. As a result, both domestic and international freight deliveries from India will be delayed. Twelve major Indian ports saw a significant drop in container flow as a result of this disaster, severely hurting MSMEs. The shipping industry, on the other hand, will not receive any relief until its container-related issues are resolved. As a result, the container industry, which is a mode of goods transportation and a crucial enabler of globalisation, must be examined holistically.
JIMS, Kalkaji
For more information visit: https://www.jagannath.org/
