The cost of Indian exports has skyrocketed as a result of attacks on ships in the Red Sea by the Yemeni Houthi militia, industry officials revealed on Monday. With an estimated $14 billion in monthly trade passing through the Red Sea, accounting for 80% of India’s goods trade with Europe, exporters have been hit hard by the rising costs. Since the attacks began in November, around 95% of vessels have opted to reroute around the Cape of Good Hope, adding an additional 4,000 to 6,000 nautical miles and delaying journeys by 14-20 days. Major shipping lines such as Maersk, MSC, and Hapag Lloyd have temporarily halted their Red Sea operations due to safety concerns.
Exporters now face a significant challenge as the cost of shipping a 24-foot container from India to Europe, the eastern coast of America, and the UK has surged from $600 to $1,500 since the attacks began. This increase has severely impacted profit margins, putting exporters under immense financial pressure. Our profit margins have been wiped out as the shipping costs have gone up, stated Arun Kumar Garodia, Chairman of the Engineering Export Promotion Council of India (EEPC). The burden of these heightened costs is compounded by the fact that most buyers are unwilling to revise prices.
According to Garodia, the rising shipping costs and the delay in the delivery of orders will cumulatively lead to a significant impact on Indian exports. He estimated that exports worth at least $10 billion could be affected in the fiscal year ending in March 2024. Compounding the situation, shipping companies have even threatened to further raise freight costs later this week.
Satya Srinivas, a senior Indian trade ministry official, revealed that delays in shipping schedules have led to around 25% of this month’s exports being held up. The majority of ships have been postponed by 2-3 weeks due to longer routes and delayed incoming ships. However, December exports, which are estimated at $38.45 billion, have not been directly impacted by the Red Sea crisis.
The repercussions of these attacks not only affect Indian exporters but also have wider implications for global trade. With India being a major player in international trade, disruptions to its exports have a ripple effect on various industries and economies worldwide.
As the situation continues to unfold, exporters grapple with the escalating costs and delays caused by the attacks. The long-term effects of these challenges remain uncertain, but for now, the focus is on finding alternate routes and mitigating the financial impact.
