Surge in Container Shipping Costs from Asia with Signs of Stabilization

Since the beginning of the year, shipping costs for containers coming from Asia have skyrocketed, witnessing an incredible increase of over 300%. As 2024 commenced, maritime freight rates reached unprecedented highs, partially due to congested ports, container shortages, and logistical delays.

Mahendra Gondeea, president of the Professional Freight Forwarders Association (APT), provided insight into these rising costs, noting that a 40-foot container from Asia, which cost between $2,300 and $2,400 in March, now averages around $9,200.

Similarly, the price for a 20-foot container has surged from $1,300 to $5,200 during the same timeframe.

However, there are indications that prices may be stabilizing. Gondeea stated, “There has been no recent increase, and we have not received any communications from shipping companies indicating that freight rates will rise again in the near future.”

A major importer, who wished to remain anonymous, echoed this sentiment, observing that after the sharp increase early in the year, freight costs are currently stable.

“We have already passed through the peak season in the maritime sector,” the importer explained.

Afzal Delbar, Secretary General of the Freeport Operators Association, also supported this view, noting, “We have seen some stability in maritime freight coming from Asia recently.

We’ll need to wait until September for a clearer picture of freight trends.”

The sentiment among industry insiders is suggesting a potential decrease in freight costs in the coming weeks, although no predictions can be made with absolute certainty due to a variety of external factors impacting shipping rates, heavily influenced by conditions in Asian ports.

Gondeea anticipated that if there are no new disruptions, a slight decline in costs may be felt around mid-September, a forecast shared by Delbar, who added, “We are currently in a wait-and-see situation.”

In the interim, however, the prices of imported goods are expected to continue rising, with these increases likely to persist until the end of October.

According to the anonymous importer, the repercussions of the soaring freight costs will be felt for at least 12 weeks.

“The products we imported in July at high freight costs will be more expensive come October,” he stated, prompting Mauritian consumers to brace for another wave of price hikes.

Government’s Response to Rising Shipping Costs

On July 30, Minister of Commerce Dorine Chukowry addressed the National Assembly regarding high shipping costs, revealing that discussions have taken place with major shipping companies such as CMA-CGM Mauritius Ltd, Mediterranean Shipping Company (Mauritius) Ltd, and Maersk Mauritius Ltd.

She emphasized that her ministry is collaborating with these companies and other relevant ministries to develop short, medium, and long-term solutions to tackle this complex issue.

Chukowry noted that the ongoing rise in maritime freight costs is a global dilemma that fell outside the direct control of her ministry.

To help citizens manage these challenges, the government has allocated significant subsidies totaling MUR 4.6 billion for essential products like gas, flour, rice, and bread.

Proposal for Tax Relief Amidst Rising Costs

In light of the mounting freight costs, Labour Party MP Ehsan Juman has proposed a potential solution.

He has reached out to Finance Minister Renganaden Padayachy regarding a recommendation to apply Value Added Tax (VAT) on Free on Board (FoB) values instead of Cost, Insurance, and Freight (CIF) values to relieve the financial burden on Mauritians.

Using the example of an imported box of powdered milk, he explained, “If the product costs MUR 100 and the freight is MUR 10, VAT is typically calculated on the CIF value, which is MUR 110. I suggested we calculate VAT based on the FoB value, thereby excluding the cost of freight.”

By excluding shipping costs from the VAT calculation, Juman claimed that consumers would pay less for imported products.

“I propose this solution for the importation of all products until the situation returns to normal,” he stated.

As the situation unfolds, it remains to be seen how effective these strategies will be in addressing the challenges posed by rising shipping costs.

Source: Defi Media