Freight costs surge 200% for MSME exporters amid geopolitical tensions

Micro, Small and Medium Enterprises (MSME) exporters continue to face rising freight costs due to ongoing geopolitical tensions in West Asia, industry representatives said. The conflict involving the United States, Iran, and Israel has disrupted shipping routes and caused container shortages, driving up costs significantly.

According to V. Rangaswamy, president of the Coimbatore District Small Industries Association (CODISSIA), the cost of a 20 TEU container from Thoothukudi or Kochi to Colombo has risen from $400 to $600, with no signs of reduction. “Containers stuck at ports in West Asian countries are absent from the market, leading to shortages and pushing costs higher,” he explained.

The impact is particularly severe for the engineering sector, where steel prices have increased by 30%, copper and brass prices have doubled, and packaging costs have also risen. “MSMEs lack the margins to absorb these steep hikes. Exporters of perishable goods are further hit by container delays,” Mr. Rangaswamy added.

Garment exporters in Tiruppur report that freight costs to the United States and the European Union have risen by nearly 200%, though they have begun to decline recently. For shipments to West Asian countries, the cost for a 20 TEU container has jumped from $300-$350 to $4,500, and for a 40 TEU container, from approximately $700 to $5,900. Additionally, shipping times have extended by two weeks.

While some buyers have agreed to share the increased costs, most have not. “Buyers are under stress due to inflation in their own countries,” noted Mr. Rangaswamy.

Pankaj Chadha, chairman of EEPC India, described the rise in freight costs as “dramatic” and a major problem for exporters. He said the waiting period for containers to America and South America is nearly two weeks. Though exporters have raised the issue with the Union government, no relief has been provided. “Freight costs cannot be regulated, and buyers are unwilling to share the burden. We have no choice but to bear the costs—reminiscent of the COVID-19 period when freight rates spiked,” he said.

Industry representatives warn that the combination of uncertainties and cost escalations is hurting MSME operations and leading to losses. The situation underscores the vulnerability of small exporters to global disruptions and the need for long-term solutions.