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Disruptions in the Red Sea route are pushing up logistics costs for exporters, even as several small volume cargo are diverted from sea route to air, which is leading to space constraints and higher air freight charges.
According to the President of the Coimbatore Custom House and Steamer Agents Association R. Rajeshkumar, there is a space crunch for those wanting to airlift the goods, as even most of the small volume cargo are not going by sea now.
Also read: Red Sea crisis | Costs up, but no adverse impact on India’s trade so far, says official
“An exporter waited for 45 days and booked a cargo on Friday at a very high cost by sea. This will not be viable for exporters sending small volume goods,” he said.
For instance, if cargo movement by sea took 32 days from an Indian port to an European port and cost $700 (40 feet container), it now takes 55 days and costs almost $4,000. Since the time taken is longer, there is a shortage in availability of vessels and containers. The exporters are trying to negotiate with their buyers. If the buyers share the costs, there is some relief for the exporters.
“There are hundreds of examples where the exporters are waiting and exploring viable options for shipments,” he said. “Some shipping lines are also studying the possibility of alternative routes such as Caspian Sea. But they are hesitating to take risks,” he added.
Hence, exporters were opting for the air route as there would be no delay when shipped by air. This had resulted in high demand for space in airlines too, he said.
Kumar Duraisamy, Joint Secretary of the Tiruppur Exporters Association, said air freight costs are almost two times higher now. The garment buyers are bearing the costs even as they are only into “cautious buying” now. However, if the situation continues to remain bad, they may look at alternative destinations such as Turkey for sourcing, he said.
According to Siddhartha Rajagopal, Executive Director of Cotton Textiles Export Promotion Council, “The freight rates [by sea] for Egypt was $600 for a 40 feet container, which is now $3,600. The transit delay to destinations such as Egypt or Turkey is by three weeks and to Latin American countries, it is almost five weeks. This has led to increase in working capital requirement of the exporters,” he said.
