HomeIndustry NewsRed Sea crisis sends TEU rates zooming

Red Sea crisis sends TEU rates zooming

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Demand for Far East plummets

Container freight rates which had hit its peak amid the covid-19 pandemic had shown much needed respite for exporters when they started to move downwards mid 2022 onwards.

However following the recent series of attacks on merchant ships in the red sea container freight rates have yet again started to spiral up for shipments bound westwards.

As per industry insiders container freight rates from Vizag to the west have been hit the hardest as rates have skyrocketed 4-5 times.

‘There has been a sudden spurt in the ocean freight levels to Europe and Mediterranean regions due to the Red Sea conflict’ said Mr Jeevan Vikas, president of the Visakhapatnam container lines association (VCLA) speaking to Vizag Industrial Scan.

Concurred Mr Subrata of Drewry and said “The red sea crisis caused by the Houthi rebels have sent container rates to the west zooming”. 

With the movement of cargo vessels being disrupted in the red sea liners are being forced to reroute and take a more circuitous route via the Cape of Good Hope hence making cargo vessels take much longer to reach their respective destinations in the west. 

‘Cargo vessels are now spending more time at sea due to longer route schedules thereby causing a shortage in inventory’ said Mr Tarun Nehra, Director, Prologis freight.

As per industry sources rates for a TEU from this region to US are hovering between $4-5k per TEU which earlier used to be around $1500-2000 per TEU. 

Similarly for Europe the rates have gone up to $3000 per TEU compared to $600-800 per TEU earlier.

‘This is definitely a matter of concern as there are huge trade volumes from Vizag and other parts of India to Europe and Med. Sectors’ said Mr Jeevan.

Dwindling Far East

Albeit shipments bound to the Far East haven’t faced any major disruption en route their destinations demand to these locations have plummeted thereby sending container freight rates in free fall mode.

‘Rates for many far east destinations have come down dangerously. On an average we are giving containers at USD 5/TEU to some of the Far East destinations like Port Klang and Busan and sometimes even at zero’ said a freight forwarder on the condition of anonymity.

Rates to Shanghai are said to be anywhere between USD 50-100 as per sources.

‘There are surplus services from Vizag connecting to Far East destinations. Ships/liners are currently having a tough time to even occupy 50% of ship capacities to these destinations’ said another freight forwarder. There are said to be about six direct connections to the Far East from Vizag.

Industry cited considerable fall in demand in commodities like rice, sugar and Ferro Alloys to have contributed to the significant drop in container rates to the Far East.

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