- Rise in transportation costs due to longer shipping routes.
- Exporters express worries over the potential impact on India’s exports.
- Attacks in the Red Sea disrupt global supply chains.
The official reported a rise in transportation costs due to longer shipping routes, impacting all countries. No adverse effects on trade volume observed yet, but concerns about potential long-term impacts, reports Deccan Herald.
Significance of EU and US in Exports
EU and US together contribute over 30% to India’s total exports. Long-term demand outlook linked to developments in these regions.
Exporter Concerns and Freight Cost Surge
Exporters express worries over the potential impact on India’s exports due to a substantial increase in freight costs. January trade data released by the commerce ministry is awaited.
Red Sea Disruptions and Global Supply Chains
Houthi rebel attacks on commercial ships in the Red Sea disrupt global supply chains.
Increased freight costs, mandatory war risk insurance, and delays due to rerouting were observed.
Container Spot Rates and Basmati Rice Export Challenges
Average container spot rates more than doubled since early December 2023.
Basmati rice exporters face soaring freight costs, reaching USD 2,000 per 20-tonne container for specific destinations.
Houthi Tactics and Shipping Route Diversification
Houthi rebels use drones and rockets to target ships in the crucial Bab al-Mandab strait.
India’s exporters were forced to diversify trade routes due to ongoing strikes and increased tensions.
Closure of Critical Trade Link via Bab al-Mandab
Large shipping firms cease using the Bab al-Mandab straits for trade with Europe, impacting critical trade links.
Ships rerouted around the Cape of Good Hope, increasing voyage distances by 40% and raising transportation time and cost.
Shipping Routes from India to Europe
The Red Sea route, shorter and faster, preferred by most shipping companies; starts from major Indian ports and passes through the Suez Canal.
The Cape of Good Hope route is longer and slower, chosen for bulk cargo shipments or when the Suez Canal is deemed risky.
Importance of Bab-el-Mandeb Strait
Vital for 30% of global container traffic, the strait faces increased tensions with various incidents in 2023. Attacks and military maneuvers escalate, impacting India’s trade and energy imports.
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Source: Deccan Herald
