Shipping Costs Set to Increase from June
Starting in June, shipping cargo to Europe and the US will become more expensive as shipping lines introduce surcharges. Vessels are being rerouted through the Cape of Good Hope instead of the Suez Canal due to Houthi terrorist attacks. German shipping line Hapag Lloyd will impose a Peak Season Surcharge (PSS) of $1,000 per container from India and West Asia to the North American West Coast. For shipments from India, Bangladesh, and Sri Lanka to the US East Coast and Gulf Coast, the PSS will be $500 per container. These surcharges will apply to all containers gated in full from June 17, 2024, and will remain in effect until further notice.
Denmark’s Maersk will impose a surcharge of $540 per twenty-foot equivalent unit (TEU) from India to the US and Canada. These rates are also subject to other applicable surcharges, including local charges and contingency charges. Similarly, CMA-CGM will impose a surcharge of $500 per container from India (excluding Bangladesh). West Asia Gulf, Red Sea, and Egypt to the US East Coast and the US Gulf starting June 14.
Longer Routes Increase Costs and Travel Time
The Suez Canal, a vital trade route, usually handles around 19,000 ships annually. The detour through the Cape of Good Hope adds about 6,000 nautical miles, compared to a typical voyage from Asia to Europe. This route doubles the travel time to more than two weeks and increases fuel costs significantly. An official from a leading leather exporting unit expressed concerns that the increased costs will severely impact trade. Since last October, shipping rates to the US have more than doubled, causing financial strain on exporters. Research firm Xeneta reported that ocean freight container spot rates have risen sharply on major trade routes since early May.
This rise indicates an early peak season for 2024, affecting various shipping lanes and markets. The Far East to North Europe trade saw a 30 percent increase from April 1 ($3,349) to May 16 ($4,343) per FEU. Rates from the Far East to the US West Coast increased. It increased by 29 percent since April 1 ($3,456) to $4,468 per FEU on May 16. Similarly, rates from the Far East to the Mediterranean rose by 22 percent from April 1 ($4,144) to $5,044 on May 16. Rates from the Far East to the US East Coast increased by 21 percent since April 1 ($4,617) to $5,584 on May 16.
Shipping costs to Europe and the US are set to increase significantly from June due to new surcharges and longer routes. The rerouting of vessels through the Cape of Good Hope instead of the Suez Canal. Combined with high demand and early peak season, are major contributing factors. This increase in costs is expected to impact trade severely, with higher freight rates adding financial strain to exporters.