Economy
Container Shortage
- 13 Sep 2021
- 3 min read
Why in News
Recently, there is an ongoing major container shortage which is impacting international trade in a big way.
Key Points
- Reasons for the Shortage:
- Low Number of Shipping Vessels:
- The reduction in the number of shipping vessels operating as a result of the Covid-19 pandemic has led to fewer empty containers being picked up.
- Congestion:
- Long waiting times at key ports such as those in the US due to congestion on Chinese ports are also contributing to lengthening turnaround time for containers.
- Low Number of Shipping Vessels:
- Global Impact:
- A sustained global economic recovery has added to the impetus to trade. The lack of availability of containers and the faster than expected recovery in international trade has pushed up freight rates significantly.
- It has led to freight rates rising by over 300%.
- A sustained global economic recovery has added to the impetus to trade. The lack of availability of containers and the faster than expected recovery in international trade has pushed up freight rates significantly.
- Impact on India:
- Indian exporters are facing major delays in their shipments and consequent liquidity issues as they have to wait longer to receive payment for exported goods.
- Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price.
- SStructural problems such as the high turnaround time for ships in India also adds to the problem
- Indian exporters are facing major delays in their shipments and consequent liquidity issues as they have to wait longer to receive payment for exported goods.
- Step Taken by the Government:
- The Central Board of Indirect Taxes and Customs has directed its officers to expeditiously dispose of the unclaimed, uncleared, and confiscated goods that are holding up containers, a move aimed at easing availability of containers for exporters.
Way Forward
- Government can regulate the export of empty containers. It can also notify a freight support scheme for all exports till the end of the fiscal when freight rates are expected to normalise as requested by the Federation of Indian Export Organisations.
- Government can also push back on a move by shipping lines to offer priority bookings at higher rates, asking that shipping lines revert to taking bookings on a first come first serve basis.
