Indian exporters brace for more price hikes as normalcy evades Red Sea

MUMBAI : Indian exporters may continue to witness a rise in shipping costs as normalcy eludes the Red Sea region and freight companies continue to avoid the Suez Canal, opting for the longer route around Africa to reach the West.

The longer route around the Cape of Good Hope is adding 12-15 days of voyage and freight charges have gone up by 80-100%, experts said.

“These companies have been looking to increase the freight charges for the past six to eight months, but due to low import-export volumes (India), the vessels have not been full. This has helped to keep the cost low. But now with the escalating situation in the Red Sea, these companies are imposing charges that are making the cost rise by 80-100%,” said Mr. Nilesh Thadani, Director, Alltrans Shipping and Logistics LLP.

Shipping major MSC in a client advisory announced that it will implement a contingency surcharge of $1,500 per container on all shipments from the Indian sub-continent to Europe and Black Sea destinations. CMA CGM announced a similar Red Sea surcharge of $1,575 for 20-foot dry containers and up to $3,000 for reefer containers and special equipment. Other major shipping lines too have announced such surcharges.

Exporters say that these charges are in addition to an escalation in the base charges.

“Given the increasing involvement of countries like USA and Iran in the Red Sea, the situation is likely to escalate further, which the freight companies are looking to exploit. They have started to impose various charges in addition to the increasing base price. These charges are now higher by two to three times, during a time in which exports are being given a firm push by the government,” said Mr. Khalid Khan, board member of the Federation of Indian Export Organisations (FIEO).

The situation in the Red Sea flared up again after Houthi militia attacked a Maersk container vessel. The company temporarily suspended all cargo movement through the Red Sea, rerouting them around the Cape of Good Hope. 

“Following the 30 December incident involving our vessel, Maersk Hangzhou, we have decided to pause all transits through the Red Sea / Gulf of Aden until further notice… In cases where it makes most sense for our customers, vessels will be rerouted and continue their journey around the Cape of Good Hope,” said Maersk in a client advisory.

Other major shippers have announced similar measures, rerouting some of their vessels. Experts believe this will result in further price hikes.

Mr. Thadani expects prices to settle at around 50-60% higher rates post the de-escalation in the Red Sea.