Transport

Sea freight costs double on global shortage of containers

COAST-SHIPPING

Singapore flagged vessel Mv NYK Clara docks at the Port of Mombasa. FILE PHOTO | NMG

Sea freight charges have doubled in the past one month due to a global shortage of containers.

Shipping agents and Container Freight Stations (CFSs) officials said the cost to import a 20 feet container from China to East African ports has increased from Sh150,000 to Sh250,000 while that of 40 feet container has doubled from Sh200,000 to Sh400,000.

A shortage of empty shipping containers in China, Kenya’s major source market for goods, has pushed up the cost as CFSs in Mombasa choke with uncollected empty containers.

Covid-19 pandemic has contributed to the shortage as shipping containers are not returning to China due to drastic reduction of Beijing's imports due to global surge in demand for certain goods during the pandemic which upended normal trade flows, stranding empty cargo containers and leading to bottlenecks.

Logistics players have urged ports management in East Africa to increase empty container limitations at their facilities to allow more containers to be shipped back.

The Kenya Ships Agents Association (KSAA) chief executive officer Juma Tellah has blamed Kenya Ports Authority (KPA) and Tanzania Ports Authority (TPA) of allocating limited space for empty containers at the ports causing very few empties being shipped back.

Mr Tellah said most ports prioritise exports leaving most empties piling at different container depots.

“We are having congestion of empties in our CFSs since very few containers are being returned as a result of imbalance of trade and small space allocated for the empty containers at the ports,” Mr Tellah said.

“There is a limitation of space both at Mombasa and Dar es Salaam port which has hampered return of empties,” said Mr Tellah.

The CEO said most of the agents are also giving priorities to exports since it is more economical than carrying empties, thus causing serious empty container shortage in Asia.

“Scarcity of empty containers results in high cost of doing business since importers must pay not only for the transport of the full import container but also for the inventory holding cost of the empty container. That is why the cost has increased,” Mr Tellah said.

Kenya International Freight and Warehousing Association chairman Roy Mwanthi said most of CFSs are congested with empty containers as few ships make call at the Port of Mombasa due to low importation season.

“For the past few months there has been very few ships coming to Mombasa. This has resulted in empty containers piling up. We are asking ports management to allocate more space for empty boxes to facilitate their return,” said Mr Mwanthi.

According to latest United Nations Conference on Trade and Development (UNTCAD) policy brief, carriers, ports and shippers were all taken by surprise after empty boxes were left in places where they were not needed, and repositioning had not been planned for during Covid-19 pandemic peak.

The UNTCAD has stated that maritime trade flows have increased after some governments eased lockdowns and approved national stimulus packages, driving up demand for containers.

“The increase in demand was stronger than expected and not met with a sufficient supply of shipping capacity,” the UNCTAD policy brief stated.

The UN agency said most of the shippers find it uneconomic to ferry back empty containers back to Asia from Africa and South America due to long routes.

“The fact that routes from China to countries in South America and Africa are often longer and more ships are required for weekly service on these routes, meaning many containers are also stuck on these routes,” read the brief.

“ Trade imbalance in these routes have also contributed to this as these nations import more manufactured goods than they export, and it’s costly for carriers to return empty boxes to China on long routes.”

In 2019, the value of Kenya’s imports from China stood at Sh361 billion a drop from Sh376 billion a year earlier.

The increase in cost, coupled with a weaker shilling has come as a boost to local manufacturers as some of the household goods that are imported from China can now be sourced locally to cut on the higher price of shipping similar goods from abroad.