Rising Freight Costs and Container Shortages Continue to Pressure MSME Exporters

Exporters cite higher shipping rates, container shortages and longer transit times as West Asia conflict continues to disrupt global logistics.

MSME exporters are experiencing continued pressure from elevated freight costs as the West Asia conflict affects container availability and shipping operations. Exporters say the higher logistics expenses are difficult to absorb, while buyers are generally unwilling to share the additional costs.

According to V. Rangaswamy, president of the Coimbatore District Small Industries Association (CODISSIA), the freight charge for a 20 twenty-foot equivalent unit (TEU) container from Thoothukudi or Kochi to Colombo, which previously stood at $400, has increased to $600, with no indication of prices easing.

“The containers that are stuck at the ports in the West Asian countries are absent in the market, leading to shortages. This is also pushing the costs up,” he said.

He added that MSMEs in the engineering sector are also dealing with higher input costs, with steel prices increasing almost 30%, copper and brass prices doubling, and packaging costs also rising.

“The MSMEs do not have the margin to bear the steep hike in freight costs. Further, those who export perishables are hit by the wait for containers,” Mr. Rangaswamy said.

Garment exporters in Tiruppur reported that freight costs for shipments to the United States and the European Union had risen by nearly 200%, although they have recently started to decline.

For exports to West Asian countries, the cost of a 20 TEU container increased from $300–$350 to $4,500, while the cost of a 40 TEU container rose from approximately $700 to $5,900. Exporters also said shipment periods have become two weeks longer.

While a limited number of buyers have agreed to share higher freight expenses, most have not.

“The buyers are also under stress as inflation is up in their countries,” added Mr. Rangaswamy.

Shipping costs from a south Indian port to Jebel Ali before the conflict ranged between $300 and $400 for a 20 TEU dry container and $900 to $1,050 for a 40 TEU container. According to exporters, these rates have now increased to $5,700 for a 20 TEU container and $7,500 for a 40 TEU container.

A recent vessel operating between Kochi and Jebel Ali recorded a transit time of seven days, with freight rates of $5,120 for a 20 TEU container and $9,310 for a 40 TEU container, said P. Subramaniam, former president of the Custom Broker and Shipping Agents Association, Coimbatore.

According to Pankaj Chadha, chairman of the Engineering Export Promotion Council (EEPC) India, freight costs have increased sharply and continue to pose a major challenge for exporters. He said container waiting times for shipments to America and South American countries have reached nearly two weeks.

“Freight costs can’t be regulated and buyers are not willing to share the costs. So, we have no other option but to bear the cost. This is similar to the pandemic time when freight costs went up,” he said.

Industry representatives said the combination of uncertainty and higher logistics costs is affecting MSME export operations and contributing to financial losses.