In August 2024, freight rates surged by nearly 70% year-on-year across Indian ports, reflecting a combination of global shipping disruptions, sustained demand, and capacity constraints. This sharp increase marks a significant change after over two years of relative stability. According to the Times of India (TOI), average prices for 40ft high-cube cargo-worthy containers jumped from $2,600 in Q1 (January-March 2024) to over $2,800 in Q2 (April-June 2024) at major domestic ports such as Chennai, Nhava Sheva, and Mundra. The trend has continued into the third quarter (July to September), with rates showing an upward trajectory.

Several factors contribute to these elevated shipping costs, including the complexities of shipping routes, the types of cargo, and market competition. According to the media report, the ongoing geopolitical issues have further exacerbated the situation, pushing freight rates even higher. These increased costs are likely to impact the profit margins of Indian companies with significant international exposure in FY25.

Freight rates have fluctuated considerably since 2020, initially rising in 2021 due to disruptions caused by the Covid-19 pandemic, which severely affected global supply chains and trade. Although rates began to stabilize in FY23 as supply chains recovered, geopolitical tensions in early 2024 triggered another surge. Events such as the Red Sea crisis necessitated rerouting of ships around the Cape of Good Hope, which not only extended transit times but also increased both freight and insurance costs.

Among Indian ports, Chennai experienced the highest increase in container prices, which rose by 50% from April to August 2024, reaching $2,340. This sharp rise is attributed to heightened local demand and increased congestion at the port, as noted by Christian Roeloffs, co-founder and CEO of Container xChange, according to the TOI. Additionally, rates continued to climb in May and June 2024 due to a container shortage, particularly affecting cargo from North East Asia. This shortage was partly driven by the expected U.S. duty hike on electric vehicles, which influenced the global container supply chain. According to Khushbu Lakhotia, Director at India Ratings & Research, these geopolitical issues are likely to impact the EBITDA of Indian companies with considerable international exposure by 100-200 basis points in FY25.

Despite the overall trend of increasing freight rates, August 2024 saw a slight softening, with average prices decreasing to $2,100 from $2,200 in July, as reported by Container xChange. This minor decrease provides some relief but does not fully mitigate the significant cost pressures that businesses continue to face. The overall picture highlights the ongoing volatility in global shipping costs and the challenges that companies must navigate in a complex and rapidly changing economic environment.