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Unexpected container shortage and spike in freight plague tire makers

Author: Staff Contributor (hello@helixtap.com), farah miller (farah@helixtap.com)

28 May 2024, 05:17 PM SGT

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  • Freight rates from Thailand to India spiked 75% compared to Q1
  • Read sea crisis and bad weather in Asia key triggers 
  • Impact to continue until mid Q3

The crunch in shipping containers and congestion capacity is driving an abrupt surge in ocean freight rates, impacting Asian rubber buyers. In an already tepid demand situation, rubber producers are plagued by rising raw material costs; a supply chain disruption could lead to further market discrepancies. 


The ongoing Red Sea crisis, coupled with adverse weather conditions in Asia, is significantly disrupting the delivery schedule for end users. A buyer source has reported a staggering 30% increase in his freight rates from Indonesia to India, and a nearly doubled freight rate from Thailand, reaching close to 100%. 


According to Helixtap market intelligence, the issue in the Asian market is particularly severe for shipments westbound. Compared to Q1 levels, the freight rates from Thailand to India's main ports have skyrocketed, reaching a staggering 75% increase. Similarly, the freight rates from Indonesia to India's main ports have also seen a significant rise, reaching around 30%. 


As per industry reports, there was a 40-foot container shortage at the Chinese port of Chongqing last week. Ocean carriers had to shorten their turnaround at destination ports to make up time for additional delays owing to bad weather in Asia at the end of April.


The effect is not only restricted to Asian countries, since November, the freight rates into the US have seen a three fold hike. This has been impacting the buying capacity and adding pressure on FOB prices. However, some market sources noted that the ongoing US shortage is partly due to the shipping companies as they would leave the often empty containers in the port.


Ports congestions and shortage of vessels delay Indian despatches


Shipping lines operating to India from the Far East are reporting severe delays in the delivery of raw material consignments from Southeast Asia to tire makers in India due to congestion in the

Southeast Asian ports for over one-and-a-half months now. The costs of the import consignments, including natural rubber, have spiked significantly in its aftermath.


"Mostly, the transshipment ports are choked with hardly any space for berthing. There is now a shortage of vessels, space in vessels, and delays in berthing and sailing. That is why the prices of imported cargo have gone up. It differs from port to port, and the increase is 30% to 80%," said a shipping line official based in Chennai.


"The ports in Indonesia, Malaysia, Vietnam, and Thailand are mainly reporting congestion apart from Singapore. It includes Laem Chabang port in Thailand, Ho Chi Minh City in Vietnam, and Port Klang in Malaysia, but there is a huge delay in Jakarta," said the official.


He said it all started after the long Chinese New Year holidays when the volume of consignments doubled to the Chinese destinations. "They started pushing these cargoes, which resulted in the shortage of space and congestion. Though there is a kind of rush every year from March to May after these holidays, this time it is so severe, with the Red Sea crisis contributing to it. If the Laem Chabang to Chennai dispatch took 18-20 days earlier, now it is taking 45-50 days," said the official.


The official said that imports have not come down due to the crisis, but the delay adds to the costs, and imported raw material prices are spiking. The official said this may go on for the next two to three months.


In its aftermath, domestic rubber sheet prices have been going up in India with torrential rains for the past week disrupting tapping in several areas in Kerala's production hub. RSS-4 prices at Kottayam went up to INR 187/kg on May 27 from INR 180/kg on May 15, and tire makers showed interest in purchasing.


The co-author of the article Vinod Nedumudy a senior journalist previously associated with leading Indian newspapers like The Free Press Journal, The New Indian Express, Deccan Chronicle and The Mathrubhumi in various capacities over a career spanning three decades. Currently based out of Kochi, India, he writes about rubber and tyre-related market developments, among other things with Helixtap. He can be reached at hello@helixtap.com