News / Capture of MSC Aries will further drive up Indian export costs

Photo: JNPT

With heightened geopolitical tensions sparked by the Iran-Israel faceoff, Indian exporters are again staring at freight costs soaring even higher and new cargo flow disruptions, after recently enjoying some respite from the Red Sea shipping crisis.

The capture of the MSC Aries by Iranian forces last weekend has escalated what had already become a major, nagging supply chain concern for the industry.

The 14,000-teu vessel was reportedly on MSC’s India-Europe service Himalaya Express service on long-term charter from London-based Zodiac Maritime.

Indian industry sources said a spike in cargo insurance premiums was inevitable, due to increased risk, while carriers could also impose new surcharges in a bid to insulate themselves from deteriorating operating conditions.

“For services on those trade routes, rates will certainly move up,” one Mumbai-based European carrier official told The Loadstar.

Meanwhile, Indian air cargo shippers are dealing with flight schedule disruptions on top of already rising airline rates.

“In light of the impending 15% rise in air freight rates from India to Europe, compounded by shipment backlogs and airspace restrictions over Iran, we are proactively seeking alternative logistics routes,” said Jitendra Srivastava, CEO of Mumbai-based freight forwarder Triton Logistics.

“We are reassessing our strategies to serve our customers as best as possible,” he added.

Vineet Malhotra, co-founder and director of Mumbai-based Kale Logistics Solutions, also voiced concerns about longer lead times for air freight, in addition to increased costs.

“The closure and subsequent restricted reopening of airspaces in Jordan, Iraq and Lebanon have disrupted air freight, resulting in heightened insurance costs, war premiums, extended flight times and unpredictable schedules,” he said.

He added that more stringent security measures at airports and cargo complexes were impacting logistics services, with exports to Europe expected to bear the brunt of the disruption, adding to the supply chain pressures created by the Red Sea crisis.

However, an Air India source shrugged off reports of serious disruption of airline services and cargo flows.

“Flights to Tel Aviv remain suspended through 20 April,” the official told The Loadstar. “Our schedules are otherwise on track, and freight rates also remain stable, as of now.”

Some ocean carriers on India-Middle East trades have just announced rate increases, to capitalise on improving demand. Nhava Sheva-Jebel Ali rates are set to rise by $100 per teu, on average, freight forwarder sources said.

CMA CGM said the increase was necessary “to provide customers with reliable and efficient service.”

On the upside, despite persistent demand challenges and supply chain bottlenecks in the past quarter, India’s export industry had a respectable performance in fiscal year 2023-24, which ended in March, with trade volumes by value only marginally lower than the previous year’s record level – down 3%, to $437bn, new data shows.

Ashwani Kumar, president of the Federation of Indian Export Organisations, said the resilient trade performance reflected a buoyant market outlook that he believed would gain further momentum amid strong economic growth expectations.

“The need of the hour is to address the Middle East geopolitical situation and Red Sea crisis challenges by ensuring availability of marine insurance and rational increase in freight charges,” he added.

New Delhi is vigorously pushing local manufacturing, which industry observers claim will help boost exports in the years ahead, with an expected announcement from US electric vehicle manufacturer Tesla of a production plant in India the latest buzz on that count.

You can contact the writer at [email protected]