freight charges in Pakistan surge by 150% due to Red Sea crisis
Published on: February 3, 2024.
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The Red Sea Trade Crisis: Impact on Pakistan’s Export Industry
In the aftermath of the Red Sea trade crisis, Pakistan is facing a daunting challenge as freight charges have surged by 150%. This increase in freight charges is posing a significant threat to the export of major commodities such as textiles, rice, fruits, and vegetables. The crisis, triggered by the recent attack on cargo vessels by the Houthis in Yemen against Israeli aggression on the Palestinian people in Gaza, has resulted in a rise in average freight charges from $1,500 to $2,500 per container.
The maritime trade crisis has forced vessels to take extended travel routes via Africa to reach Europe and America, in order to avoid the conflict zone. As a result, delivery times have increased, leading to a shortage of empty containers and causing demurrages in various countries, including Pakistan.
According to Aasim A Siddiqui, Chairman of the All Pakistan Shipping Association (APSA), the surge in freight charges can be directly attributed to the tension in the Red Sea. He explained that the longer travel time via the African route, which now takes three weeks compared to one week through the Red Sea, has contributed to the shortage of containers and the subsequent increase in freight charges.
Impact on Export Industries
The rise in freight charges has surpassed the export price of rice, which is Pakistan’s second-largest export. This puts the rice industry at great risk. Furthermore, the export of textiles, the largest sector in Pakistan, as well as fruits and vegetables, including mandarin (kinnow), are also under threat.
It is worth noting that various stakeholders, including seaports, terminal handlers, and shipping companies, are charging demurrage on containers due to delays in the clearance of containerized cargo. While the rates may vary, healthy competition among companies allows importers and exporters to switch to other companies if they charge unjustified fees.
Pakistan relies on approximately 18 to 20 foreign shipping companies to transport trade cargo worth over $70 billion annually. However, reforms in the maritime trade policy are crucial to address the challenges faced by the industry.
Efforts to Increase Maritime Trade
Despite the current crisis, shipping companies are making concerted efforts to boost maritime trade. However, Aasim A Siddiqui emphasized the need for reforms in the maritime trade policy to improve the situation. He also suggested addressing issues in Afghan transit trade to curb smuggling, rather than suspending the entire trade to Kabul via Pakistan. He called for a crackdown on elements engaged in illegal activities rather than a complete closure of transit trade.
Shipping companies associated with Afghan trade operate in compliance with the law and will follow the policy of the federal government regarding Afghan transit trade.
Plea to the Government
Aasim A Siddiqui appealed to the government to release the 10,000 containers stuck at the port due to issues pending since the Covid-19 pandemic. He also highlighted the financial losses caused by the suspension of Afghan transit trade, which has left another 1,000 containers in limbo.
In conclusion, the Red Sea trade crisis has had a significant impact on Pakistan’s export industry, with a steep increase in freight charges threatening major commodities’ export, including rice, textiles, and fruits and vegetables. Reforms in the maritime trade policy and addressing issues in Afghan transit trade are crucial to overcome these challenges and revive the export industry.
Source: The Express Tribune
