Since November, the Iranian-backed Houthis have launched at least 34 attacks on shipping through the waterways leading to the Suez Canal. The Houthis support the Palestinians and have vowed to keep attacking until the Israel-Hamas war ends.
Disruptions
Continuous disruptions in the Red Sea route could lead to a significant increase in freight and forwarding (F&F) costs, potentially rising by 25-30% for corporations heavily involved in international trade, according to a report released on Friday by credit rating agency Indra.
The ongoing attacks on container vessels in the Red Sea have severely affected one of the world’s most crucial trade routes for several weeks.
Trade volume dropped
The Suez Canal handled 12% to 15% of global trade in 2023, but UNCTAD estimates that the trade volume going through the waterway dropped by 42% over the last two months,.
Attacks on shipping
Since November, the Iranian-backed Houthis have launched at least 34 attacks on shipping through the waterways leading to the Suez Canal. The Houthis support the Palestinians and have vowed to keep attacking until the Israel-Hamas war ends.
“The challenge is significant for the entities having low value addition therefore thin margins. Although large entities have adequate elbow room to accommodate such incremental cost, delays and disruptions in supply chains will be key factors to watch for,” said Soumyajit Niyogi, Director, Core Analytical Group, Ind-Ra.
Freight rates increased
The initial reaction can be seen in freight rates rising by 150 per cent in the past 45 days, the rating agency said.The route constituted 40 per cent of the total oil imports and 24 per cent of the total exports during April to October 2023, it said.
As much as 20-25 per cent of India’s foreign trade is routed through the Suez Canal, with key products such as crude oil, auto & auto ancillaries, chemicals, textiles and iron & steel being affected. Indian exports are facing higher shipping costs due to rerouting, leading to reduced export volumes, affecting small and medium-sized enterprises dealing with a high volume of low-value products.
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Source : First post
