Sustained surge in container freight rates could affect business operations of exporters in FY25: Ind-Ra
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Credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has predicted that the recent surge in container freight rates by 4x (YoY basis), if sustained, could affect the business operations, EBITDA margins and working capital of exporters during FY25.
According to the report, while freight rates corrected significantly through 2023 and first 9M24 after the surge witnessed during 2022 post COVID amid supply chain bottlenecks, the correction in freight and forwarding cost of Indian corporates was lower than that for international freight and forwarding cost and is likely to inch up in FY25. The report further noted that the working capital cycle, which had peaked during the pandemic and thereafter a mean reversion, is showing signs of lengthening in FY25.
Besides, Ind-Ra stated that while this surge could be temporary, given the advancing of Chinese exports given the impending US duty protections coming into force from October 1, 2024 and re-stocking of products for Christmas, it does reflect a broader issue of container shortages given the longer routes being taken to avoid the Red Sea channel.
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