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Current Affairs

Major container shortage

Date: 15 September 2021 Tags: World Economy

Issue

The freight rates have risen by over 300 per cent in the past year due to shortages in container for international shipping.

 

Background

The government has asked exporters to help it in tiding over the crisis, which has hit key trading routes of the world.

 

Details

  • Many containers have been left in inland depots and stuck at ports for long durations due to reduction in global shipping owing to the pandemic.

  • The reduction in shipping and also ships has led to fewer empty containers being picked up, causing the current crisis.

  • The shipping ports of the US have been congested, causing increase in turnaround time for ships to transport the containers.

  • The fast pickup of global trade has not been balanced with recovery of container market. The shipping charges were also increased due to recovery in international trade.

 

Impact on Indian exporters

  • Indian exporters have been forced to wait longer to receive payment for exported goods. This is due to delay in shipments and liquidity issues.

  • The shipment time has been increased to 70-90 days instead of 40-45 days that has resulted in late payments for exporters.

 

Government’s role in addressing issue

  • The government can control the export of empty containers as foreign importers are ready to pay premium on empty containers.

  • Exporters are also asking the government to release containers that have been confiscated by government agencies or abandoned.

  • There is also demand to introduce a freight support scheme for all exports till the charges come back to normal.

  • Government can ask shipping companies to remove the premium charges on booking early and bring back bookings on a first come first serve basis.

  • The move by the government to manufacture shipping containers domestically needs to be further speeded up.