Red Sea Attacks’ Potential Impact On Freight Costs

• Houthi rebel attacks disrupt global trade, leading to heightened freight costs.
• Maersk’s withdrawal and rerouting options contribute to Indian export concerns, with consignments held back and a potential 50% increase in freight rates.
• Challenges include surging freight charges impacting commodities. Uncertainties persist in the Red Sea’s vital maritime route.

In the aftermath of Houthi rebel attacks in the Red Sea, global trade faces disruptions, primarily due to heightened freight costs. The situation escalated when Houthi rebels targeted a Singapore-flagged Maersk container, leading to Maersk’s decision to withdraw its ships from the Red Sea for at least 48 hours.

Insights from Experts: Short-Term and Long-Term Impact on Indian Exports

Jayanta Kumar Seal, Professor at IIFT Kolkata, and Ajay Sahai, CEO of FIEO, discussed potential impacts on Indian exports. Sahai emphasized exporters’ concerns, with consignments being held back due to fears of theft or destruction. Buyers are advising caution, especially in FoB contracts, leading to a potential 50% increase in freight rates.

Shipping Challenges and Rerouting Impact

Some shipping lines opt for longer routes around the Cape of Good Hope, adding 12-14 days to voyage times. This rerouting may affect container availability, with Sahai anticipating a 50% increase in freight rates. Sunil K Vaswani from the Container Shipping Lines Association highlighted the additional capacities needed for rerouting, potentially increasing costs for customers.

Projections for India’s Exports in 2024

India’s 2024 exports are expected to grow by 3-4% to reach around $800 billion. Sahai foresees a slight decline in the merchandise sector but projects a more optimistic 14-15% growth in the services sector. However, the ongoing Red Sea situation may impact these projections.

Specific Challenges and Market Effects

Seal pointed out specific challenges, citing a surge in freight charges to Yemen from $850 to $2,400 per container. This surge has affected the domestic market, impacting basmati exports and causing price fluctuations in commodities like sunflower oil.

Red Sea Concerns and Maritime Routes

The Red Sea, a crucial maritime route, faces heightened concerns as Houthi rebel attacks disrupt commercial ships navigating the Suez Canal—a vital sea route connecting Asia and Europe. The ongoing situation poses uncertainties for the global shipping industry and trade routes.

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Source: CNBCTV18

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