CASA sheds light on unprecedented shortage in containers and rising freight rates

The following are some selected excerpts from an interview done by CASA (Ceylon Association of Ships’ Agents) to enlighten the industry, on why container shortages are being faced globally and in Sri Lanka and possible alternatives available for the Sri Lankan Exporters & Importers.

 Since the middle of 2020 and the outbreak of COVID-19, the global shortage of shipping containers has become a hot topic. Before the pandemic, experts anticipated a positive growth rate in the container industry through 2024. Yet the current crisis has caused the entire supply chain to function at a snail’s pace or in some instances to come to a relative stand still.

Containers that were mainly shipped from China (Far East) destined to the US and Europe were held up as all twenty four elements pertaining to the cycle of shipping from the depot to the shipper, port to the ship and more were severely affected due to labour shortage, inefficiency at terminals functioning without full force, ships being delayed at ports as the average turn-around time of 80 days exceeded 120 days – causing an unprecedented disruption to the industry.

In the Port of Colombo we handle a throughput of 80% of transshipment cargo out of an estimated total throughput of 6.8 million TEUs with the balance being imports and exports. In Sri Lanka we were able to balance out the requirement of containers for export with the imports despite there being a disparity in terms of the container requirements for exports which is predominantly in 40’s while imports are predominantly 20’s. With the import restrictions imposed by the Government, there was a dip in the imports coming into the country resulting in a shortage of containers mainly 40’ which are required for exports. To meet the 40’ container requirement for exports, the alternative was to reposition empty 40’ containers which is a costly exercise. Shipping lines were not willing to spend extra money to reposition containers. In view of this, most exporters faced a shortage of equipment for their export requirement during the last six months in Sri Lanka.

The freight rates have drastically increased in the long haul; for instance, the Shanghai Rotterdam Index which is mainly the route from Asia to Europe increased by 311% within the last 6-9 months (April to December) in comparison to 2019 -2020. Since the shippers were willing to pay, priority was given to the long haul sectors.

The only way of getting space and equipment for Sri Lankan exporters was to pay higher freight rates in line with what was being charged from the Far east.

Present freight rates shows a significant spike up to three or four fold levels or over 300% levels. Carriers should take in to consideration freight surge ex Sri Lanka too to pave the way for additional vessel space allocations instead of the comparison made with other origins.

It is obvious that other manufacturing load ports are pitched higher than Sri Lanka due to Country’s GDP, own geopolitical structures to name a few.

There are a few key points which were suggested at a Ministry meeting held recently regarding various issues pertaining to the current crisis. One such matter was the excess of 20 foot containers as SL exporters converting to 20 footers incurs an additional  cost but if the shipping lines can provide an alternative in terms of cost,  we can make use of the stagnant lot which would be mutually beneficial for all stakeholders. 

It is a widely known fact that the most popular equipment used by modern day sea transportation is the 4OHQ. There are selected types of commodities which attracts 20DC equipment hence substituting 20DC does not always appear pragmatic.