Problems in Red Sea impacting exports; increasing freight, insurance costs

The escalation of troubles in the Red Sea has started impacting India's exports as shippers have to take longer routes to reach destinations in the US and Europe, an official has said.

The situation around the Bab-el-Mandeb Strait, a crucial shipping route connecting the Red Sea and the Mediterranean Sea to the Indian Ocean, has escalated due to recent attacks by Yemen-based Houthi militants.

Due to these attacks, the shippers are taking consignments through the Cape of Good Hope, resulting in delays of almost 14 days and also higher freight and insurance costs.

The issues being faced by the concerned stakeholders were discussed at a high-level meeting in the commerce ministry on January 4.

Stakeholders, including traders, shippers, container firms and freight forwarders were there at the meeting.

"They told us that freight cost has increased. They have to take a long route now and due to that, the turnaround time has increased. It has increased by 14 days," the official said.

Exports to Europe, the east coast of the US and Latin America are facing problems.

Due to attacks, shipping lines have reduced their movement through the Red Sea and taking the longer route via the Cape of Good Hope, encircling the African continent.

"Insurance costs have also increased because they are not sure what (will) happen to the ships. Some consignments have passed through the long route. Some ships are also being escorted, provided by the government," the official added.

The trade route of Bab-el-Mandeb Strait, the Suez Canal and the Red Sea is shorter and faster than the Cape of Good Hope route, making it the preferred option for most shipping companies.

The route starts from major Indian ports like Mumbai, JNPT, or Chennai, heads westward through the Arabian Sea, enters the Red Sea, and navigates through the Suez Canal into the Mediterranean Sea.

From there, ships can reach various European ports depending on their destination.

The Cape of Good Hope route is longer and slower than the Suez Canal route, but it avoids the potential for delays or disruptions at the Suez Canal.

It is typically used for bulk cargo shipments where time is less critical or when political instability in the Middle East raises concerns about using the Suez Canal.

The route starts from the same Indian ports, heads southward across the Indian Ocean, rounds the Cape of Good Hope at the southern tip of Africa, and then sails northward along the west coast of Africa before entering the Mediterranean Sea and reaching European ports.