Indian exporters are expected to experience a steady increase in shipping costs as the Red Sea region remains unstable, leading freight companies to opt for the longer route around Africa to reach the West. Experts have stated that taking the longer route, around the Cape of Good Hope, adds 12-15 days of voyage while freight charges have surged by 80-100%.
Several companies have been planning to raise freight charges for the past several months, but due to low import-export volumes in India, the vessels have not been running at full capacity, helping to keep costs low. However, with the escalating situation in the Red Sea, freight companies are now imposing charges, causing costs to rise significantly.
Major shipping companies such as MSC and CMA CGM have announced contingency surcharges for shipments from the Indian sub-continent to Europe and Black Sea destinations. These surcharges can be as high as $3,000 for reefer containers and special equipment. Other shipping lines have also followed suit with similar surcharges. Exporters are concerned that these charges are being added to an already elevated base price.
Exporters and industry experts believe that the involvement of countries like the United States and Iran in the Red Sea region will further escalate the situation, allowing freight companies to exploit the circumstances. The recent attack by the Houthi militia on a Maersk container vessel prompted the company to temporarily suspend all cargo movement through the Red Sea, rerouting shipments around the Cape of Good Hope. Other major shippers have implemented similar measures, leading experts to anticipate further price hikes.
Nilesh Thadani, director of Alltrans Shipping and Logistics LLP, predicts that prices will eventually settle at rates around 50-60% higher once the situation in the Red Sea de-escalates. The Red Sea, a vital maritime route to the Suez Canal, faces heightened uncertainty as Houthi militia continue to disrupt commercial ships passing through the region.
