On April 21, India’s ministry of shipping (MoS) ordered the cancellation of fees including penalty charges, demurrages and detention charges at all major ports and container freight stations (CFSs) until the end of India’s Covid-19-related lockdown on May 3.
But since the order was published, there have been several reports of shipping firms and CFSs acting in defiance of the government guidelines and continuing to charge fees on stranded containers.
One medium-sized shipping line, headquartered in Chennai, has been stripped of its license to operate as a container agent at the Kolkata Dock System, pending further investigation, according to an email seen by Fastmarkets on Friday May 1.
In that email, the shipping line said that the removal of its license was due to “prima facie evidence on charging detention [fees] by the line” in violation of an order from the MoS last week.
This appeared to be confirmed by a statement issued by the Material Recycling Association of India (MRAI), which reported that Kolkata Port took action against the violation by Sea Hawk Lines as a container agent, and that it has been ‘deactivated and discontinued for operation at Kolkata Port.’
The MRAI has been a prominent campaigner not only for these charges to be waived for the original lockdown and into the extension of that period, but also for them to be strictly implemented in order to protect the scrap industry, which stands to lose large sums of money.
Market sources confirmed to Fastmarkets that they had also heard of the suspension at Kolkata, and hoped that it would act as a “warning shot” and be seen as a lesson to other shipping lines, that they should follow government guidelines on port and container fees.
Despite the decree, the MRAI also reported that a letter was sent by the Container Freight Stations Association of India (CFSAI) saying that it would not give any waiver on demurrage charges, noting that CFSs are governed under the Handling of Cargo in Custom Area Regulation 2009, and that the MoS order did not specify HCCAR Rules.
Some foreign shipping companies have also said that they would not give a waiver.
But Maersk, one of the world’s largest shipping lines, has confirmed that it will waive the fees, as has OOCL Shipping.
Two traders said that they had already seen other shipping lines fall into line with the order, with one major line extending free demurrage until May 3 at eight major ports in south and east India.
Additionally, APM Terminals, said to be one of the world’s largest port and terminal operators, announced that it would waive fees at its Mumbai site until May 3.
Earlier this week, the shipping minister threatened to compel vessels to stay in port for a mandatory 24-day quarantine period if their operators did not follow the government order.
“Most [market participants] are concerned about clearing cargoes at the ports. The shipping lines are behaving badly, despite the government saying [there must be] no detention charges until May,” a market source said.
“There were strict instructions and strong messages [to the shipping lines] from the ministry of shipping to adhere to, but we have yet to receive written confirmation from our shipping line. We are waiting, but they should accept the order. We expect fees to be waived until the end of the lockdown plus 14 days,” a scrap buyer said.
The alleged defiance of the MoS order by shipping lines and CFSs has led to growing pressure from the scrap industry for action to be taken against firms that ignore the guidelines.
MRAI president Sanjay Mehta said on social media on April 25 that shipping lines and CFSs acting against the order should see their licenses to operate in India cancelled with immediate effect.
Industry estimates in India were that there were around 250,000 containers of metallic scrap stranded at Indian ports, inland container depots (ICDs) and CFSs, with one small buyer estimated to have 100 containers awaiting clearance.
Cash flow crunch
The spat over port waivers is the latest battle in what has become a nightmarish market environment for India’s scrap metal importers, following reports of difficulties in opening and dealing with letters of credit (LCs) in March.
Fastmarkets has heard that many Indian scrap metal companies were facing difficulties in paying suppliers and customers, because they were themselves waiting to be paid by their own debtors.
“Out of 100 containers in an Indian port, scrap metal would not even make up 10%. A lot of [cargo] is made up [with material owned by] bigger companies such as those involved in chemicals and the mobile phone sector,” according to one Indian trader dealing in both ferrous and non-ferrous scrap.
“These companies can afford higher port charges because they have deep pockets and much higher [borrowing] limits with banks,” he added. “But in scrap, you have mostly medium and smaller enterprises. Their cashflow has stopped and nobody is paying anybody else.”
The problems included a lack of couriers to transport the required trade documents to banks, and although some documents have been switched to electronic transmission, others remain on paper.
There were plans to introduce an electronic version of the Bill of Lading, which is a key legal document required for the shipment of goods. This would add to the introduction of digitization of other trading documents including invoices and delivery orders, as well as payments, to try to release cargoes from ports and to remove delays.
As a result of buyers being unable to clear cargoes, together with a severe shortage of truck drivers, material was not being discharged from ports and a container bottleneck has been caused.
This has made the market apprehensive about trading and shipping any material into India in case it too becomes stranded, and has brought trading to a pause.
But some shipping lines which were still charging fees on containers have shown some sensitivity toward scrap companies that may be in trouble because of higher fees, the trader added.
He said that some had been charging only $25 per day for a 20ft container. This compared with typical charges of $50-70 per day per 20ft container, as reported by the All India Non Ferrous Metal Exim Association in mid-April.
If CFSs and shipping lines continue to charge port fees on stranded cargoes, the MRAI has estimated that Indian scrap importers could stand to lose 800 billion rupees ($10.74 billion) for such charges.
Indian authorities have withdrawn the operating license from at least one shipping line after allegations that charges were being wrongfully applied to cargoes stranded at ports across the country, Fastmarkets has learnt.