Freight rates for Indian shipments to Europe and Africa could surge up to 25-30 percent on security risks along the Red Sea route, the usual maritime route connecting Asia to Europe, as learned from local exporters on Wednesday. Moreover, the rise is expected also for freights for the raw material imports, like scrap. In general, all market sources agree that the increase by 10 percent has already been a done deal.
Market sources polled that majority of insurance companies are already refusing shipments crossing the Red Sea after militants in the region hit ships with anti-ballistic missiles and some insurers are levying an additional $5,200 as war risk coverage over and above freight (freight) rates.
“This is developing into a serious concern as the Bab-el-Mandeb Strait trade route is the
crucial route for many countries. If the ships have to go through the Cape of Good Hope,
there will be a sharp jump in cost. Insurance companies are either not ready to cover
shipments on the route or are imposing an additional $5,200 war risk surcharge to the
freight (freight) charges,” Ajay Sahai, Director General and Chief Executive Officer of the
Federation of Indian Export Organisations (FIEO) said.
“If the situation sustains, freight (freight) rates could jump 25-30 percent that will seriously affect Indian exporters. However, if the United States (US) and other countries, including France start patrolling the area, then the risk would come down,” Sahai added.
An official with a large export trading house said that “increased risk could also lead to higher insurance premiums and freight (freight) rates, impacting Indian traders. After one
of the worst escalation in years, large shipping firms [including the Danish firm Maersk and Swiss-Italian Mediterranean Shipping Company, German Hapag-Lloyd, and French CMA CGM (Compagnie Maritime d’Affrètement – Compagnie Générale Maritime)] stopped plying ships through the region”.
Moreover, the increased freight (freight) rates are expected to be see for imported scrap
to India (india), as well as other products, shipped on this route. “People are talking about $2-5/mt freight (freight) increase for all the vessels which will pass through Red Sea,” a trader said.
