The Shift in Cargo Rates: India-Middle East Trades Adjust as Red Sea Crisis Influence Wanes

In the dynamic world of international shipping, trade lanes between India and the Middle East are witnessing notable shifts in pricing strategies as the influence of the Red Sea crisis begins to diminish. Here’s a closer look at how the pricing landscape is evolving, and what it means for businesses relying on these crucial routes.

Declining Pricing Momentum from Red Sea Crisis

While the Red Sea crisis previously propelled shipping rates across many trade lanes, it seems the India-Persian Gulf routes are now an exception. The urgency that once spurred higher rates is fading, forcing carriers to rethink their pricing strategies to maintain profitability and service quality.

Carriers Implementing Rate Hikes

Recognizing the need to adjust to these changing dynamics, major shipping lines are introducing rate hikes. Starting next week, CMA CGM has announced a rate increase of US$200 per container from Nhava Sheva and Mundra to various Middle East ports. This increase is part of a broader strategy to "provide customers with reliable and efficient service," as noted in a recent customer advisory. The new rates will coincide with the arrival of the vessel "Spil Citra" at Nhava Sheva on April 21 and Mundra on April 23.

Hapag-Lloyd is also adjusting its pricing, implementing a peak season surcharge of US$100 per TEU and US$200 per FEU for reefer shipments from key Indian ports to locations in Iraq and Saudi Arabia, effective from April 20.

Stable to Rising Freight Rates

Despite the broader market's pricing corrections, freight rates on the India-Middle East lane, particularly to Jebel Ali, have remained steady or even shown slight increases. Current rates are averaging at US$250 per TEU and US$500 per FEU, as per market insiders.

Boost from India-UAE Economic Agreement

A significant factor contributing to the robustness of this trade lane is the comprehensive economic partnership agreement (CEPA) between India and the UAE, established in 2022. This agreement has significantly boosted trade volumes, with Maersk and other leading container lines expanding their services to accommodate the growing demand. The primary commodities benefiting from this uptick include electronics, foodstuffs, textiles, apparel, and chemicals.

Looking Forward

As bilateral efforts continue to push non-oil trade towards a projected US$100 billion over the next five years, the strategic importance of the India-Middle East route is more pronounced than ever. However, it's worth noting that while this lane exhibits strength, other major routes from India to Europe, the Mediterranean, and the United States have seen rate declines from the earlier highs of this year.

Container Volume Traction at Indian Ports

Despite these rate fluctuations and ongoing demand challenges, Indian ports have shown strong performance in the fiscal year 2023-24. Mundra port recorded a 12% increase in container throughput with 7.4 million TEUs, while Nhava Sheva reported a 6% increase to 6.4 million TEUs.

Conclusion

The shipping industry’s landscape is continually evolving, influenced by geopolitical events, economic agreements, and market dynamics. For businesses engaged in the India-Middle East trade, staying informed and agile in response to these changes is crucial for navigating the complex and competitive waters of international trade.