- As disruptions in the Red Sea shipping persist for five months, India experiences a surge in monthly merchandise exports.
- However, concerns loom over the adverse impact on trade data in the new fiscal year, with escalating tensions in West Asia exacerbating freight rates and surcharges.
- A report by the Global Trade Research Initiative warns of substantial disruptions to trade volumes in 2024, citing rising shipping costs, delayed shipments, and squeezed margins across industries globally.
The Red Sea shipping disruptions, initiated by attacks from Iran-backed Houthis on cargo ships, have reached a critical juncture after five months, affecting global trade and supply chains traversing the Suez Canal, a vital route handling 30% of global container trade. Transit times for ships detouring around Africa’s Cape of Good Hope have increased by 30%, while global container shipping capacity has decreased by 9%.
Impact on Global Trade
The crisis is expected to significantly impact trade volumes in 2024, with rising shipping and insurance costs, delayed shipments, and disrupted global value chains. Countries across Asia, Africa, and Europe are likely to face disruptions across various industries due to the ongoing conflict in the Red Sea region.
Effects on Indian Trade
Indian trade, particularly with the Middle East, Africa, and Europe, has been severely impacted, with shipping costs increasing by 40-60% and delays of up to 20 days due to rerouting. High cocoa prices and shortages from Africa affect confectionery companies’ profits, while textile and leather industries negotiate shipping costs with buyers, impacting earnings.
Trade Route Dynamics
Trade passing through the Suez Canal has decreased by 50% year-over-year, while trade around the Cape of Good Hope has surged by an estimated 74% compared to last year’s levels. These dynamics underscore the significant shifts in global trade routes and the challenges faced by businesses navigating through the crisis.
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Source: The Sunday Guardian
