Red Sea crisis escalates costs & delays for Asian textile exports

Despite heightened vigilance by US defence forces at the Red Sea-Suez Canal route, Houthi attacks remain a serious concern for ship liners. Consequently, freight companies continue to avoid the Suez Canal, opting for the longer route around Africa to reach the West. 

The Red Sea crisis is expected to further slow garment and textile exports from Asian nations due to heightened freight charges.
Despite increased security, shipping routes are diverting, with companies imposing substantial surcharges.
Exporters are concerned about adjusting costs with buyers and maintaining margins amid a bearish market.

Shipping major MSC has announced that it will implement a contingency surcharge of $1,500 per container on all shipments from the Indian sub-continent to Europe and Black Sea destinations. CMA CGM has also notified a Red Sea surcharge of $1,575 for 20-foot dry containers and up to $3,000 for reefer containers and special equipment. Other major shipping lines have announced similar surcharges. 

Experts have noted that shipping companies were looking to increase freight charges in the last six months but were unable to do so due to slow international trade. However, the current geopolitical situation has prompted these companies to increase the charges. 

Indian garment and textile exporters have expressed concerns over negotiating with their buyers to adjust the higher freight charges for FOB consignments. They are worried about new orders and the pricing of goods. An exporter from Punjab commented that the market condition remains bearish, meaning buyers may not be willing to accept higher prices amid increasing freight charges, while exporters are not in a position to accept more pressure on their margins due to stable prices of goods. 

Overall, garment and textile exporters, majorly Asian, are worried about new orders from Europe and the US, their main buyers. The Red Sea-Suez Canal is a vital route for their shipments, and there is concern that freight charges may not return to normal levels even after the crisis subsides in the following months. 

Fibre2Fashion News Desk (KUL)