Escalated freight and insurance costs may well be here to stay even as freight forwarders continue to explore alternatives to the crisis-hit Red Sea shipping route, according to TVS Supply Chain Solutions executive chairman R Dinesh.
In an exclusive chat with CNBC-TV18, Dinesh said only 30% of the company's business was in global freight forwarding, which has partially insulated the firm from the crisis.
"The company's integrated supply chain business remains in good health, while our network solutions and freight-forwarding businesses continue to see challenges," said Dinesh, adding, "Global freight-forwarding accounts for only 30% of our total business, and we expect continuing uncertainty in the Red Sea."
TVS Supply Chain Solutions, promoted by the erstwhile Chennai-based TVS Group, and now part of the TVS Mobility Group, went public in August and has seen its integrated supply chain business grow and perform. However, its challenges in freight forwarding have been exacerbated by the recent maritime crisis in the Red Sea, where a recent influx of pirate attacks by Houthi rebels.
The Containerized Freight Index (CFD) has risen by 406.75 points or 23.12% since January, indicative of just how high freight prices have risen in the Red Sea region. The index is projected to trade at 2302 by the end of the quarter and continue its upward trajectory to 2575.45 over the next 12 months, according to data tracker tradingeconomics.com.
"We expect freight costs to continue going up for some time, although it is difficult to predict for how many quarters this will last," Dinesh said, adding that projecting accurate freight rates in the medium term would be difficult: "None of us have an immediate answer to how the crisis will evolve; we will watch the global freight-forwarding space, but our focus is on other segments."
TVS Supply Chain Solutions returned a net profit of ₹10 crore for the December 2023 quarter, after posting losses in the previous quarter. The company has said it expects its network solutions business to stage a recovery as it believes prices have bottomed out.
"We will continue to find solutions for our customers," said Dinesh, reflecting on the ongoing crisis, "We are keen to continue exploring alternative solutions to Red Sea routes, and we expect freight costs to continue going up for a while."
While managing the ongoing maritime crisis continues to be TVS Supply Chain Solutions' biggest challenge, the company's customer growth and business pipeline are optimistic signs of an impending upward trajectory.
(Edited by : Amrita)
First Published: Feb 20, 2024 1:30 PM IST
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