Soaring freight costs negatively impacting small and medium exporters, report finds
While the blockade of the Suez Canal in March 2021 highlighted various challenges faced by the shipping and logistics industry, SMEs in particular have been going through a deeper and more widespread crisis since the start of the Covid pandemic. and the resulting economic contraction, the report notes.
The increase in freight costs over the past year due to the shortage of shipping containers is having a negative impact on small and medium exporters, according to a new report. As of June 10, 2021, the Drewry World Composite Container Index (WCI) – a global index of container spot market freight rates on all major routes, peaked at $ 6,727, up more than 300% since the coronavirus emerged in December 2019, trade finance firm Drip Capital said in its Global Shipping Crisis report. According to its internal analysis, SMEs around the world hold more than 25 percent of the $ 18 trillion in maritime trade. While the blockade of the Suez Canal in March 2021 raised various challenges faced by the shipping and logistics industry, SMEs in particular have been going through a deeper and more widespread crisis since the start of the COVID-19 pandemic. and the resulting economic contraction, the company said.
“In March 2020, with social distancing protocols and coronavirus clusters among dockworkers (which meant slower shipment processing times), there emerged a shortage of containers in Asia as empty metal boxes were stuck. in North American and European ports, ”the report notes. The container shortage situation got completely out of hand in November 2020, so the Container Availability Index (CAx) for ‘forty-foot equivalent units hit 0.9 as containers piled up at the Port of Los Angeles (LA) ”. CAx is a measure between 0 and 1 that reveals the number of containers leaving and entering a port in the same week. Low CAx values indicate a shortage of containers while high values indicate an excess of containers.
“We are planning our expeditions well in advance than a year ago. Still, the availability of containers has been a problem. When the goods are ready for two to three weeks, we do not get an empty container to ship the goods to us from India. This has affected our sales and delayed our collections, ”the report said, citing Vivek Pandit, CEO of Indian Foods and Spices, a US SME wholesale importer of Indian food items.
Businesses desperate to export their goods overseas meant paying higher tariffs to acquire containers, which drove up shipping costs, with Drewry’s composite WCI dropping from $ 2,628 in early November 2020 to $ 5,340 in January 2021. “It has become more difficult for US exporters to obtain containers due to aggressive Chinese tactics to bring back empty containers. This competitive environment has affected many, but above all, all SME exporters who have been burdened by these high costs, ”the report states.
Source: L’Express Financier