Indian traders who are engaged in import-export trade through Chennai have expressed worries on over-dependence on Colombo Port as Maersk Line, world's biggest container shipping line, announced its decision to shut its weekly direct service to Chennai.

Exporters and importers shipping cargo containers directly to Mediterranean destinations through the Chennai port will have to re-route them via Colombo, Salalah or Singapore from October as Maersk Line, world’s biggest container shipping line, has decided to shut its weekly direct service which was started in February, Indian website Livemint said.

The Danish carrier’s announcement on Wednesday to discontinue the Indian subcontinent-Mediterranean service or ME5 just a few months into its operations has surprised many in the shipping industry. The termination of the direct service will make India depend more on neighbouring transshipment ports.

The service linked Chennai port with Colombo, Salalah, Djibouti, Jeddah, Aqaba, Port Said, Genoa, Valencia and Algeciras, deploying seven vessels each with a capacity to load as much as 4,600 twenty foot equivalent units (TEUs). A TEU is the standard size of a container and a common measure of capacity in the container business.

“In our continuous effort to provide our customers with an attractive and competitive West Central Asia/Europe network— both in terms of capacity and coverage—Maersk Line is enhancing the ME1, ME2 and ME3 services and discontinuing the ME5 service with effect from October 2015,” Maersk Line sad in a statement.

"We are adding new port calls to the ME1, ME2, ME3 services and, at the same time, launching a dedicated feeder shuttle between Chennai, Colombo and Salalah to ensure a world-class product between West Central Asia and Europe,” the statement said further.

Container shipping executives see the decision by Maersk as a fallout of the plunging freight rates, over-capacity and slowing demand. “The announcement has come as a surprise because the container ships deployed on the service were loading as much as 3,000 TEUs per sailing,” a spokesman for Chennai Port told Livemint.

“The discontinuation of the direct service by Maersk is a serious issue for exporters,” said K. Unnikrishnan, joint deputy director general at the Chennai-based southern regional office of the Federation of Indian Export Organizations or FIEO. “We were struggling to get direct vessels calls when Maersk came up with this service in February,” the spokesman further said.

“Re-routing the containers through Colombo, Salalah or Singapore will lead to extra time and costs for sending or receiving cargo,” said A.V. Vijayakumar, a Chennai-based customs house agent.

“Overdependence on Colombo is going to hurt us in the long run. Even today, 60% of India’s containers are shipped to destinations via Colombo,” FIEO’s Unnikrishnan said.

Saju Chacko, managing director at Chennai-based Caravel Logistics Pvt. Ltd, said that carriers were restructuring the supply side in an effort to prop-up rates that have dropped drastically.

“Globally, capacity is too high whereas demand is very less. So, fleet owners are trying to reduce capacity to bring it in line with the market requirement and get a fair rate,” Chacko added.

Chennai is India’s third-largest container gateway after Jawaharlal Nehru Port near Mumbai, Mundra Port in Gujarat.

(With inputs from Livemint)