Maersk Announces Rate Hike, Imposes $1,000 Container Fee

 The Danish shipping line has announced this rate increase for all types of cargo originating from India and West Asia.

Shipper are worried of the impact this might have on trade. It is to be noted that ever since the Red Sea Crisis, shippers have been experiencing delays in their cargo reaching destinations in the US. Now that Maersk is increasing container rates, shippers are expecting other shipping lines to follow suit, considering that the detour via the Cape of Good Hope on the southern tip of Africa leads to a 15-day’ delay in reaching their destination from Asia to Europe and further to the US.

CMA CGM, in December 2023, more than tripled its freight rates for all types of goods. The FAK has been increased to $4,750 per TEU (twenty-foot equivalent unit), up from $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-foot box or a 40-foot box. However, Maersk’s rate would be the same across all types of containers, an official of a large freight forwarding company said.

Freight charges for a 20-foot container to the US today are around $4,200. For suppliers that work on ‘a free on board (FOB) basis, the rate increase has been eliminated in the 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 when shipping goods on a cost, insurance, and freight (CIF) basis, as the supplier takes on the cost of shipping and insurance. Any rate increase 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.

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 mentioned increase is for a one-way trip from Asia to Europe.
Experts see the lack of national capacity as the root cause of the steep costs of visiting India.

The Red Sea is a vital waterway for global trade, particularly for the transportation of goods between Asia and Europe. The canal handles nearly 12 percent of global trade.