- The shipping industry is grappling with the impact of the ongoing Iran-Israel conflict, which has led to increased freight rates and longer travel times.
- The disruptions are causing significant concerns for global trade routes through the Red Sea and necessitating alternative routes for Indian exporters.
The recent tensions between Iran and Israel have caused shipping rates to rise significantly. The average shipping cost for a 40-foot container for the Southeast Asia-India-European Union route was around $3,077 in March. Senior government officials and industry experts predict rates could increase by 20-25% in the coming weeks if disruptions persist.
Travel Time Delays
Several shipping companies have been forced to suspend transit through the crucial Middle East maritime route due to ongoing conflicts, leading to longer shipping times and increased costs. Indian exporters are also seeking alternative routes to avoid affected airspaces, resulting in higher air freight charges.
Uncertainty and Instability
The global shipping industry is experiencing a “shadow of uncertainty” due to elevated interest rates in Western economies and geopolitical tensions, including the crisis in the Red Sea. Any significant escalation or de-escalation in these conflicts could have profound effects on the broader economic trajectory.
Impact on Air Freight
Ajay Sahai, director general of the Federation of Indian Export Organisations, expects air freight from India to Europe to rise by 10-15% in the coming weeks due to disruptions in shipping channels. Additionally, WorldACD air cargo market data shows air freight rates for traffic between India and Europe have risen by more than $4 per kg since the last week of March.
Potential Suez and Panama Canal Disruptions
The potential for disruptions in major global trade routes such as the Suez Canal and Panama Canal adds to the economic instability. Certain military groups could cause disruptions for the former, while natural occurrences pose a potential threat to the latter.
The shipping industry continues to navigate these challenges, with exporters and shipping companies adjusting their operations to mitigate the impact of the ongoing conflict.
