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Exports to be badly hit as freight rates increase by 100% to 150% as shipping carriers change route
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Shardul Nautiyal, Mumbai
January 04 , 2024
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Freight rates have increased by more than 100% to 150% inclusive of all surcharges in the past one week as shipping carriers have changed route via Cape of Good Hope around Africa to reach Europe and the US, badly impacting pharma exports.
Freight lines are forced to avoid the Suez Canal and take a longer route around Africa to reach the West. The earlier route from South East Asia to the West has been blocked due to the ongoing Israel-Hamas war.
“There has been a drastic increase of US$ 1,250 to US$ 1,300 in the freight rates from the earlier rates of US$ 450 to US$ 500 which will also go further with Peak Season Surcharge (PSS) in the range of US$ 500 for 20-footer and US$ 1,000 for 40-footer shipping line. The alternate route around the Cape of Good Hope has also increased shipping time by another additional 20 days which used to be only 30 days earlier,” informed Mayuri Gupta, managing director, Indikos Forwarding Pvt Ltd.
Talking about the situation, Sandeep Modi, joint secretary, Federation of Pharmaceutical and Allied Products Merchant Exporters (FPME) said, “The situation will most likely assuage as the US and Europe governments will make diplomatic interventions and provide protection to the Carriers in the interest of business and trade. Vulnerability of pharma exports from India to Europe, Central and Northern America have increased due to high shipment costs and delays in deliveries. Enabling the usage of the Suez Canal and transiting through the Red Sea and Gulf of Aden is on top priority of the US and Europe.”
The US along with a host of other countries is creating a new force to protect the vessels passing through the Red Sea. The UK, Bahrain, Canada, France, Italy, Netherlands, Norway, Seychelles and Spain have joined the new maritime security mission.
Some of the major carriers like Maersk, MSC, Hapag Lloyd, CMA CGM, Zim, HMM have suspended their operations in the Red Sea region due to the ongoing tensions in the Red Sea.
Hapag Lloyd has routed their vessels around the Cape of Good Hope. HMM has instructed all HMM vessels in the area bound to pass through the Suez Canal, to reroute to the Cape of Good Hope.
Diverting vessels around the Cape of Good Hope to mitigate the ongoing risks of sailing through the region is a necessary step in the interest of safety, but it has ultimately brought about increased costs for carriers.
As such, Maersk is invoking Clause 20(a) of the Terms for Carriage and Clause 22(a) of the House Bill of Lading (whichever is appropriate to the relevant carriage) in order to recover these costs. The additional freight and costs of carriage under Clause 20(a) of the Terms for Carriage and Clause 22(a) of the House Bill of Lading have been specified. These additional charges are effective immediately until further notice and will apply to all bookings on the trades that are subject to diversion. This includes shipments already ‘on the water’ that have been or will be diverted. It will be presented as Transit Disruption Surcharge (TDS) on customer invoices. In addition, due to severe operational disruption, Maersk is announcing an Emergency Contingency Surcharge (ECS) for selected markets from 1st January, 2024 until further notice.
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