Rising Export Costs for India Due to Red Sea Shipping Disruptions | Latest News

Attacks in the Red Sea disrupt global trade; more ships will avoid this area

The Red Sea, a key global trade route, is facing disruptions due to attacks, notably by Yemen's Houthi group. This has led to shipping companies like Hapag-Lloyd and OOCL altering their routes, opting for longer paths around Africa, resulting in increased travel times and costs.

These changes are affecting global supply chains, causing delays and price surges in shipping containers, and impacting various industries and everyday commodities. Efforts, including naval mobilizations, are being made to secure safe passage and mitigate disruptions.

The situation also affects regional players like Israel and has broader implications for global trade, necessitating cooperation and strategic planning to overcome these challenges.

1. Suez Canal Route Avoidance: Due to attacks by Yemen's Houthi Group in the Red Sea, shipping lines are avoiding the Suez Canal route.

2. Impact on Indian Exporters: Indian exporters expect freight rates to increase by up to 25% and insurance premiums to rise.

3. Trade and Inflation Concerns: Persistent attacks could lead to imported inflation, increasing costs for capital goods and raw materials in India.

4. Impact on RBI's Inflation Management: The Red Sea incidents could challenge the Reserve Bank of India's control over core inflation.

5. Export Value Decline: India's merchandise exports have shrunk in six of the first eight months of the current financial year.

6. Alternative Shipping Routes: Ships may need to take a longer route through the Cape of Good Hope, adding 12-14 days to travel time. These occurrences necessitated the need to reroute or divert vessels through the Cape of Good Hope, which added approximately 7,000 to 10,000 kilometers.

7 Container Shortage Risk: Longer sea time by vessels could lead to another round of container shortages.

8.Possible Freight Rate Increase: Indian exporters anticipate a 25% increase in freight rates if Suez route remains inaccessible.

9. Large Shipping Firms Affected: Major firms like Maersk and MSC have stopped plying ships in the region.

10. US Intervention: The US announced a multinational patrolling operation to alleviate shipping dangers.