Sea freight rates hit record levels despite peace in West Asia

Despite a semblance of peace in the war situation in West Asia, the shipping market is witnessing a massive surge, forcing Indian exporters to pay heavy prices. According to a report by Sandesh (Business), sea freight rates have seen a record-breaking increase.

The freight for a 40-foot container from India to Dubai's Jebel Ali port has risen to approximately $8,000 (around ₹7 lakh), compared to just $800 (around ₹70 thousand) before the war. In June-July, this cost was $5,500. Similarly, the freight for a 40-foot container to the US is currently $12,000 (over ₹10.5 lakh), which was $6,000 in June-July and between $3,000 to $3,500 before the war. In Europe, freight has also increased to $8,500, up from the previous $2,000.

Vessel movement in the Strait of Hormuz had come to a standstill during the war. Although vessel movement resumed from August, freight rates have not declined. This is because shipping companies remain cautious about sending vessels into the Persian Gulf. Some vessels are using alternative ports instead of heading directly to the destination port, increasing both time and costs. Additionally, traders are having to pay for insurance and war-related surcharges.

This situation is causing difficulties for traders of bulk and low-priced export commodities such as ceramic tiles, wooden furniture, cement, coir products, non-basmati rice, and other grains. According to exporters, they are bearing the burden of the increased transportation costs themselves, which has led to a reduction in their profit margins.

Looking ahead, as seasonal demand wanes, there is a possibility of some relief in freight rates on the US and Europe routes. However, freight rates on the route to Gulf countries are likely to remain high. Until shipping companies resume regular services, port operations return to normal, and war-related surcharges decrease, it will be difficult for traders to find significant relief.