Freight rates are expected to continue to increase in February if the tension in the Red Sea intensifies, which will affect global supply chains, says the Employers' Confederation of Thai Trade and Industry (EconThai).
The confederation has already seen freight rates rise by between 1.89 and 2.42 times and they won't stop increasing if the tension continues and escalates.
"We have closely monitored the surge in freight rates that will put pressure on transportation costs," said Tanit Sorat, vice-chairman of EconThai.
"This may eventually lead to higher inflation and an economic slowdown in countries that use shipping routes through the Red Sea."
EconThai urged Thai exporters to brace for the impact of the tension, triggered by the Houthi rebel group which has launched numerous attacks on commercial ships in the Red Sea since mid-November 2023.
Freight rates for ships from Thailand bound for Europe via the Red Sea increased in December last year, reaching US$1,650 per twenty foot equivalent unit (TEU), according to EconThai. The forward price for the shipping of goods will increase to $4,000 per TEU in February 2024.
Exporters will also have to pay a higher rate of insurance, a transit disruption surcharge and a contingency adjustment charge if the tension in the Red Sea shows no signs of abating.
Mr Tanit said EconThai is worried the Houthi attacks would lead to a surge in global crude oil prices, which would cause domestic oil prices to increase, affecting both the transport and manufacturing sectors.
The prices of some raw materials imported into Thailand also need to be monitored.
The Internal Trade Department said earlier imports of raw materials are now costlier, particularly because of higher freight rates for chemical fertilisers and steel, but this has yet to affect sales prices.
The Houthi rebel group is based in Yemen and is backed by Iran.
The Houthi attacks, mainly directed at ships with links to Israel, led to the establishment of a multilateral coalition by the US in December to protect commercial traffic in the area.
Some ships are being rerouted around the Cape of Good Hope. Products from Thailand destined for the Middle East, Europe, North Africa and parts of the eastern US face unavoidable higher costs if rerouted around the Cape of Good Hope, says the Thai National Shippers' Council.