Livemint: Samir Kapadia shares insights on Red Sea Crisis
Recent attacks on cargo ships in the Red Sea have made it a perilous trade route, severely disrupting Indian exporters and importers. Skyrocketing container prices and extended transit times have led to significant logistical challenges, loss of competitiveness, and increased costs, potentially impacting India's economic growth.
By India Index
5 minutes read
The Red Sea, once a crucial trade route, has become perilous due to recent cargo ship attacks. This has caused severe disruptions for Indian exporters and importers, who face skyrocketing container prices, extended transit times, and heightened uncertainty.
Container costs have surged up to 400%, with some routes diverted around Africa. This has led to a loss of competitiveness for Indian exports and logistical challenges. Exporters struggle to absorb these costs, while importers deal with rising prices, potentially leading to inflation and reduced consumer demand.
"Buyers are unwilling to share the higher freight costs, slowing cargo movement. Rates for non-Red Sea destinations are also rising due to fewer available ships," said Vijay Kumar Setia, Director of Chaman Lal Setia Exports Ltd and former president of All India Rice Exporters of India (AIREA).
Price Pinch
Container shipping costs have surged dramatically, with rates increasing from $250 to $1,500 for some Middle East routes and from $700 to $3,500 for Europe. For shipments from India to the US, rates have jumped from $1,700 to $4,100, a 150% increase.
"The Drewry Global Index has risen by over $1,000 in the past 15 days. Freight increases on some routes are as high as 400%, with additional surcharges imposed," said Ajay Sahai of the Federation of Indian Export Organisations (FIEO).
Rice exports have been hit hard, with container costs to the Middle East increasing by 500%, from $250 to $1,500. European routes have seen a 400% rise, from $700 to $3,500. These costs severely impact the industry, said Anshul Garg, Director and CEO of Aroma Agrotech.
Alternative routes around Africa have further escalated container shipping costs on key routes, noted Tirth Shah, Executive Director of GSP Crop Science.
India is not the only country facing the brunt. “The fact that China's largest state-owned shipping company, Cosco, suspended shipping to Israel through the Red Sea is not reassuring. Even they are suspecting further conflict,” said Samir N. Kapadia, Founder and CEO of India Index.
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