US action on China hits container supply

NEW DELHI: The rush to beat the deadline for higher US tariffs on Chinese goods has aggravated a container shortage in India as several empty ones were shipped to China as its exports to US are getting front-loaded.

The Biden administration had announced its decision to impose higher tariffs on several Chinese goods - ranging from steel to solar cells, lithium ion batteries and their parts, electric vehicles and medical products - which were to be implemented in phases from this year until 2026.

Amid weak global demand, the shortage is expected to reflect in India's trade numbers for Aug and Sept as exporters are looking for containers to ship their goods, a govt official said.

While container rates have started softening, after a sharp spike, following the attack on ships by Houthis, exporters have their own share of woes, compounded by retaliatory tariffs on Chinese goods. With some of the duties kicking in from Aug, Chinese exporters decided to front-load supplies to beat the higher tariffs. This even involved shipping empty containers to China so that they could be stocked up and goods could be shipped to the US. The European Union and Canada too have imposed increased duties.

What has added to the complication is shipping lines skipping several Indian ports due to a longer route and increased voyage time on account of the Red Sea crisis, which was already affecting the supply of containers. Since the same set of containers are used for shipments, the cycle gets longer, impacting availability. "Shipping lines are skipping some of our ports due to longer voyage time as they are able to get cargo at bigger ports," said Fieo director general Ajay Sahay.

Govt officials indicated that the worst may be over and container supply may improve in coming months, helping Indian exports.

"We expect things to improve over the next six-eight weeks as there is demand for some of our products and our efforts to diversify our basket of goods are also helping," said an official.

India's goods exports are estimated to have increased 6.6% to $261.5 billion during April-July and govt expects it to remain in positive territory this fiscal year.