South Asian importers and traders, who are struggling with record-high imported ferrous scrap prices, are now subject to fewer free day allowance at subcontinental ports. Importers would have to bear additional tariffs for container clearance at subcontinental ports post the free days.
To manage the persistent container shortage, major shipping lines have decided to slash the number of free days at many destinations, particularly in Asia. Ongoing container shortage, globally, is not just affecting Asian ports, but also inland exporters in the US and European countries, according to Davis Index sources.
Mediterranean Shipping Company (MSC) has cut free days at destination ports in South Asia from the usual of 14 days to 12 days each in India and Pakistan; and 10 days in Bangladesh, effective Jan 1, 2021. While Maersk has announced 12 days standard free time effective Jan 1, 2021. A few other shipping lines have also lowered it to as low as 7 days.
Additional tariffs post-free days – Major shipping lines have increased additional charges for the movement of the containers post standard free days.
| Maersk’s additional tariffs | ||
|---|---|---|
| Days | 20’Dry | 40’/ 45’Dry/HC |
| 0-12 days | Free | Free |
| 13-17 days | Rs6,000 | Rs12,000 |
| 18 day onwards | Rs8,000 | Rs16,000 |
Container shortage
There is a huge demand for empty containers to export goods from Asian markets. To discharge containers faster, shipping companies have reduced free days and increased tariffs post the free period, said a major trader in Pakistan.
Many container carriers are shifting empty containers from the US route to Asian countries. Demand for steel exports from Asia is high than those from the US.
Major shipping line Hapag-Lloyd has stopped accepting 40-foot reefer container booking for empty pick-up from depots in Germany, Austria, Switzerland, Hungary and the Czech Republic until the end of the year. In Hamburg, it has also stopped container booking for empty pick-up for 40-ft units till the end of the year, reported shipping dailies.
Industry reactions
The year 2021 could be another interesting year for importers. Lowered free days will affect trades but not prices. We are already seeing buyers resisting new contracts amid uncertainty, said a stainless-steel maker.
In India, customs clearance takes a very long time. The reduced free period will result in an extra burden, especially on importers for ferrous and non-ferrous scrap, said a Delhi-based recycler.
The total free period for container movement should not be reduced as the customs takes 3-4 days to clear the containers, minimum 14 days is required for importers and traders to manage everything smoothly, said a steelmaker.
Lower shipping free days will directly add to freight cost, said a Gujarat, Jamnagar-based zinc scrap importer. Less free days might not be a big issue, but the shipping company’s monopoly to implement whatever they please is the main problem. Many shipping lines have made huge profits when COVID-19-related restrictions were eased in India, Pakistan and Bangladesh.