Red Sea crisis: Freight costs rise for India Inc

Feb 12, 2024

New Delhi: The red sea crisis has started having an impact India inkleading to higher freight costs On some routes, and doubling transit time Of ships. The latest data from online container logistics platform Container xChange shows that one of the key routes, Shanghai to Chennai, has seen container leasing rates rise by 144% from $85 per unit in November 2023 to $144 in January 2024.
Experts told TOI that the average increase in freight costs for trade from India to Europe and the US across sectors including pharma, automobile and textiles has been around 40-50% in January 2024 compared to September 2023. Storage charges in India are reasonable. He explained that liners are therefore preferring to use leased boxes rather than carrying their own containers.
“Throughout January, container prices have consistently remained at historically high levels, reflecting a widespread belief that container prices will continue to rise due to the ongoing Red Sea crisis. So far, the degree of impact for India is less than that of Europe. And the US is lower in comparison,'' he said, adding that the market expects a further bounce around Chinese New Year (Chinese New Year began on February 10 and celebrations will continue for 16 days).
“Our analysis shows that there is a clear shortage of capacity in China, with container rates rising week-on-week as exporters struggle to move containers out of China. Empty containers from Europe to China In contrast, the challenge has increased due to the Red Sea crisis. “India is experiencing a mild impact compared to China and Europe,” said Christian Roelofs, co-founder and CEO of Container xChange. Is.”
Domestic companies use the Red Sea route via the Suez Canal to trade with Europe, North America and North Africa. According to Crisil Ratings, about 50% of India's exports of Rs 18 lakh crore and 30% of its imports of Rs 17 lakh crore last fiscal came from these sectors.
“Exports to Europe and Africa are being affected as freight rates have increased. Also, transit time has also increased, impacting cash flow. For our European purchases, transit time has increased from 30 to 45 days. Since we buy on CIF (cost, insurance and freight) basis from Europe, it is not really affecting us,” said an executive at a freight forwarding firm. To add to the trouble, transit time for some routes is an additional two weeks. Increasing attacks on ships sailing in the area since November 2023 have forced ships to consider a longer route beyond the Cape of Good Hope.

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