Sending cargo to Europe and US by ships will become more expensive from June as shipping lines are introducing surcharges to meet the additional cost by routing the vessels through the Cape of Good Hope. From November, they stopped using the Suez Canal due to attacks on ships by Houthi terrorists in the region.

German shipping line Hapag Lloyd will impose a Peak Season Surcharge (PSS) of $1,000 per container from the Indian Subcontinent & Middle East to the North America West Coast. Indian Subcontinent & Middle East: India, Pakistan, Bangladesh, Sri Lanka, UAE, Qatar, Bahrain, Oman, Kuwait, Iraq, Saudi Arabia, Jordan

The PSS from India, Bangladesh, Sri Lanka to US East Coast & Gulf Coast will be $500 per Container. This will be applicable to all containers gated in full from June 17, 2024, and valid until further notice, the line said.

Denmark’s Maersk will impose a surcharge of $540 per twenty foot equivalent unit from India to the US and Canada. The above rates are also subject to other applicable surcharges, including local charges and contingency charges.

Similarly, the French line CMA-CGM from June 14 (loading date) will impose a surcharge of $500 per container from Indian Subcontinent (except Bangladesh), Middle East Gulf, Red Sea & Egypt to the US East Coast & US Gulf.

The Suez Canal, a tiny strip of water that connects the Red Sea and the Meditteranean Sea, is a vital trade route. Some 19,000 ships— or one every half an hour — pass through the 193-km-long, man-made canal every year.

The circuitous route through the Cape of Good Hope adds about 6,000 nautical miles to a typical voyage from Asia to Europe and doubles the travel time to more than a fortnight, said J Krishnan of S Natesa Iyer Logistics LLP, one of Chennai’s oldest custom house agents. These ships burn a million dollars worth of fuel per trip more than they would if they went via the Suez Canal.

An official of a leading leather exporting unit said the increase will hurt the trade badly. Since last October, the rates to the US have more than doubled.

Research firm Xeneta said ocean freight container spot rates have risen sharply on the world’s top trades since the start of May, prompting speculation that the peak season has arrived early in 2024.

The biggest rise comes on the Far East to North Europe trade which increased by 30 per cent from April 1 ($3,349) to stand at $4,343 per FEU on May 16. This is 198 per cent higher than 12 months ago ($1,456).

From the Far East into the US West Coast, rates have increased by 29 per cent since the start of April ($3,456) to 4,468 per FEU on May 16. This is 214 per cent higher than 12 months ago ($1,422).

From the Far East into the Mediterranean, rates have increased by 22 per cent since 1 April ($4,144) to stand at $5,044 on May 16 - an increase of 100 per cent compared to 12 months ago ($2,521).

From the Far East into the US East Coast, rates have increased by 21 per cent since April 1 ($4,617) to stand at $5,584 on May 16, an increase of 129 per cent compared to 12 months ago ($2 434).

Emily Stausbøll, Xeneta Senior Shipping Analyst, said that there are numerous reasons for these rate increases, and the speed at which it has happened has caused nervousness in the market.

The demand reached record levels in the first quarter of 2024, up by 9.2 per cent compared to Q1 2023, and comes at a time when the Red Sea situation is putting increased pressure on shipping capacity.

“Many US shippers used 2023 to bring down inventory levels from the pandemic highs, which means there is likely space in newly built warehouses to frontload imports ahead of peak season and build a buffer into supply chains. The risk of having too high inventories is more palatable than the risk of having goods arrive too late,” he said.