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Vanishing traffic at key ports signals demand slump in West


In a sign of slowing demand amid geopolitical turmoil, the wait time for berthing of ships at India’s largest and busiest port in Kandla has slipped from 7-9 days to less than a day, shippers and exporters said. They also warned there could be more stress on the trade front during the winter, mainly due to the weakening demand from Europe, India’s second-largest export market.

The Kandla port in Gujarat handles the largest share of traffic among all the major ports in the country. The cargo volume handled at the Kandla port was 127 million tonnes (mt) during the last fiscal. In terms of traffic handled, the Kandla port is followed by the Paradip port in Odisha and Jawaharlal Nehru Port Trust (JNPT) in Navi Mumbai.

“Kandla port, on average, had a wait time of 7-8 days for any ship to come and berth. Today, its berthing is on arrival,” the head of a Singapore-based shipping service provider said on condition of anonymity. “This has not happened because we have gotten efficient but because demand is vanishing. Demand in domestic market may be rising, but there is no doubt that there is a recession in the export market.”

“Moreover, container freight rates have gone down sharply. You can imagine the extent of falling demand by the fact that freight rates in the busiest route from Asia to the US have fallen from $17,000 per container three months ago to $2,500,” he added.

An exporter serving the India-West Africa route said freight rates have fallen from $140 per container to $80-90, adding the rates are on the decline not just in select routes but everywhere.

“Supply has declined in all products, not only in a few products. Moreover, there has been an export curb on a number of commodities such as wheat, rice and steel. So, that has had an impact,” another exporter said.

Queries sent to the ministry of commerce and industry remained unanswered till press time.

Narendra Goenka, chairman of the Apparel Export Promotion Council, said exports of textiles and ready-made garments are likely to decline by 10-15% in the last quarter of the current fiscal, with orders slowing down sharply. “While India is in a fairly strong economic position, demand is severely affected in advanced economies due to the geopolitical situation and high-interest rates. Therefore, the last quarter of the fiscal may see a 10-15% decline in apparel and textile exports,” said Goenka.

He said the EU market is turning out to be more negative in demand than the US. “While US orders are seeing a small reduction, the decline in the EU is quite significant. Buyers are holding their orders or deferring them,” he said.

Europe is staring at a crisis in energy and cost of living. European energy prices have spiked given the uncertainty caused by the war in Ukraine and the continent’s plans to wean itself from crucial supplies of Russian oil and gas. Europe now faces the prospect of sky-high household utility bills, power cuts and disrupted industrial activity.

Ajay Sahai, director-general and CEO of the Federation of Indian Export Organizations (FIEO), said demand is definitely down for high-value products but is up for low-value products. “At this point, we expect a little dent in high-value exports, while I feel that volumes remain intact. We also feel there will be increasing opportunities for India with respect to trade with Russia. We expect that we will end the year with around 12% growth, taking exports close to $470 billion,” Sahai said. He said while demand in EU is definitely down, the US hasn’t seen much drop. “In many recent export shows in the EU, buyer response is extremely lukewarm,” he said.

The government estimates export growth to slow to 7.3% in the remaining seven months of the fiscal from 17.7% in the first five months till August, assuming outbound shipments to touch $470 billion in this fiscal from $422 billion last year.

Moderation in global supply chain bottlenecks is visible in the New York Federal Reserve’s Global Supply Chain Pressure Index, which was down to an 18-month low as of 22 August.

Sanjay Budhia, managing director of Patton Group, an engineering products firm, said orders to US are seeing a dip due to accumulation of inventory with the buyers after the easing of shipping lines.

“Demand has been deferred. There was some kind of over-ordering due to various factors, including uncertainty in China, non-availability of containers, and everyone was in a panic mode as they were unsure when orders would come. So, they have a lot of inventory. Now, they want to use this material for a month or two; by December, we expect demand to normalize,” said Budhia, who is also chairman of the CII national committee on exports and imports.

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