Danish shipping line Maersk has announced a rate increase of $1,000 per container to the US and Canada ports from March 2. The increase is applicable to cargo originating from India and West Asia, and for all types of cargo, according to a trade notice issued by the line.

The steep increase will impact shippers, who are already facing delays in their cargo reaching destinations in the US due to the Red Sea crisis, which started on October 19, 2023.

Industry sources say other shipping lines may follow suit as the detour via the Cape of Good Hope on the southern tip of Africa means a 15 days’ delay in reaching their destination from Asia to Europe, and further to the US.

In December, the French liner CMA-CGM more than tripled Freight All Kinds (rates applicable to all types of goods) from December 25. The FAK has been increased to $4,750 per TEU (twenty foot equivalent unit), against $1,000 two months ago. The rates include basic freight and bunker-related surcharges.

Usually, the rate increase would be different for boxes of different sizes - a 20 ft or for a 40 ft. However, Maersk has said the rate would be the same for all types, an official of a large freight forwarding company said.

Freight charges for a 20-ft container to the US today costs around $4,200. For suppliers that work on ‘free on board’ (FOB) basis, the rate increase has been eliminated in delivery of goods. In FOB, freight charges are negotiated in India, and it is the buyer’s responsibility to pay. However, the risk is higher while sending goods on cost, insurance, and freight (CIF) basis, where the supplier takes on the cost of shipping, and insurance. Any increase in rate has to be borne by the supplier, said a source.

The Red Sea crisis has also impacted Indian exporters adversely. The detour around the Cape of Good Hope involves additional time and cost for the major container lines, , said J Krishnan of S Natesa Iyer Logistics LLP.

While operating costs are estimated to have increased by an additional $1 million due to the detour, the increase of $1,000 per container on a vessel with a carrying capacity of 18,000 twenty foot equivalent units (teu) works out to $18 million. This increase is for a one-way trip from Asia to Europe, said Krishnan.

Lack of national capacity is the root cause for such steep costs visiting the Indian trade, he said.

The Red Sea is critical for maritime trade, especially the movement of goods between Asia and Europe. The canal handles nearly 12 per cent of global trade.