Red Sea shipping pause : Industry sees 30% rise in costs, 2-week delay

NEW DELHI : Industry is bracing for a 30% rise in freight and insurance costs, and delays of around 15 days for consignments to reach Europe, with global shipping majors avoiding the Red Sea and Suez Canal.

Sector watchers said that the alternate route between Europe and Asia through the Cape of Good Hope will take two-three weeks more, depending on where the consignment is to be delivered. This is likely to result in containers being held up in transit for longer and freight prices firming up.

The Red Sea and Suez Canal are on a crucial shipping route for India as goods between Europe and Asia move through them. The decision to avoid the Red Sea route was announced by AP Moller-Maersk, MSC, CMA CGM, and Hapag-Lloyd in the last few days.

This was an outcome of attacks on commercial ships by Iran-backed Houthi militants in Yemen. It is estimated that roughly 12% of global trade through 30% of all containers in the world move through the Suez Canal.

“A call on whether to reroute ships through South Africa has not yet been taken. For now, the decision is to just hold the position of vessels at the nearest safe harbour,” a representative at one of the four shipping companies told, adding that the situation is dynamic.

The decision could have a significant impact on sea shipments, said Ajay Sahai, Director General, Federation of Indian Export Organisations (FIEO).

“It may lead to a rise in freight also since the alternative is to sail around the Cape of Good Hope, which adds up to 10 days sailing time for ships from Asia to North Europe and East Mediterranean,” he said.

Sahai said that overall, there could be a 30-40% rise in costs.

“We don’t know whether the attacks will stop in a week or will take more time,” said the first person quoted above. This situation has already started putting pressure on exports from India.

“We could not find ships to load cars which we export to Europe from India,” said a representative for a foreign shipping line in India. “The vessels market is already saturated with Chinese demand and Christmas, New Year-related commerce.”

While exports are under pressure, India’s imports may not be as impacted, according to Amitabh Kumar, India’s former Director General of Shipping.