Ocean Freight rates are increasing every day. There are several reasons surrounding the matter. The foremost reason is the Red Sea crisis. Apart from that, port congestion in the Middle East and Asia, and empty containers in the Gulf are other reasons. The increasing freight rates can greatly impact the sales and prices of the goods inside the container. How will they impact these goods? What will be the other consequences? Let us have a look below.
Why Is Ocean Freight Increasing?
Ocean Freight is increasing while the traders are facing several issues. The freight charges are facing fluctuation around the world. In the Middle East, Red Sea Crisis is playing an important role. The crisis started in 2023 during the Israel and Iran war when missiles were launched on Israel. It also included the attack on the vessels and the shipping in the Red Sea. Thus, importers prefer to skip the area due to possible damage if they enter the sea. The consequences of attacks are long-term.
Several steps are taken to handle this condition. JNPT is already at its 100% utilization. Jawahar Lal Nehru port will expand further in the coming years for DFC connectivity. The expansion will increase the port’s capacity from 6.5 million to 10 million TEUs. Apart from that, several sea routes of India surged in the traffic. While a few witness reduced amount of traffic on the ports. Vizag port is the busiest among all with a traffic increase of 14%. The traffic is expected to increase more in 12 ports of India.
The reports show that the Drewry Index is 2 times higher. The index shows the changes in freight rates. Every passage has different hikes in freight rates. For example, Shangai to Genoa has changes of 17% in the freight rate for containers of 40 ft. While Shanghai to Rotterdam has freight changes by 14% and Shanghai to LA changes by 11%. The numbers from the Drewry Index mention that it will increase in the next week as well. Apart from that, Indian research claims the freight rates to be already 3-4x high.
The freight charges are increasing over the period of time. It will increase further in the next few months. There is a need to settle dispurtes to take things back to normal. However, JNPT expansion will also play a crucial role by providing more space for the port. The DFC connectivity will also help in the transportation of goods and services. It is a rail route that will help with this transportation.