India Capacity Cuts Create Growing Space Crunch for U.S. Imports

Importers shipping from India to the United States are facing a challenge that has become all too familiar in global logistics: not enough vessel space.

The reason is simple. Ocean carriers have withdrawn significant capacity from India trade lanes, tightening an already constrained market. The timing could not be worse for shippers, particularly as India continues to grow as an alternative sourcing destination for companies diversifying supply chains beyond China.

What makes today's market particularly noteworthy is how dramatically conditions have changed since the start of this year's contract cycle. At that time, carriers were dealing with weaker-than-expected cargo volumes and excess capacity. This prompted MSC to withdraw its Indus Express service at the end of May, resulting in an estimated 20% to 25% reduction in market capacity. ONE followed suit by withdrawing its WIN service at the end of July, reducing capacity by another 2% to 5%.

Unfortunately, as capacity was being reduced, the amount of cargo that needs to be shipped remains the same, forcing more importers to compete for less space. At the same time, many importers accelerated shipments to get ahead of anticipated bunker-related cost increases following the spike in oil prices after the Iran conflict. Similar to last year's tariff frontloading, this put additional pressure on an already tightening market.

"Carriers have become much more aggressive about managing supply," said Craig Lind, Manager of OEC Group's Seattle Branch. "Suspending services and blanking sailings has dramatically reduced available capacity and put upward pressure on freight rates."

MSC's and ONE's actions have created intense competition for a much smaller pool of available vessel space. This historically tight market to the U.S. East Coast now requires longer booking lead times. Additionally, shippers are seeing frequent cargo rollovers and increased pressure on rates. The result has been one of the tightest India-U.S. markets in recent memory. Until carriers restore meaningful capacity or existing backlogs subside, importers should expect competition for space to remain strong.

"Today's market looks a lot like what we experienced during the pandemic, which means shippers should be following a similar playbook," said Kaleb Shaw, Manager of OEC Group's Kansas City Branch. "The best way to navigate the current environment is to book early, remain flexible, and plan ahead. Shippers who stay proactive will be in the strongest position to succeed."