Increase in costs of shipping (40-60 per cent) and insurance (15-20 per cent) and delayed arrival of shipments (by up to 20 days or more) arising out of the Red Sea crisis will continue to disrupt global value chains, squeeze margins and make exports of many low margin products unviable from current locations, according to the Global Trade Research Initiative (GTRI). Added to the problem is potential cargo loss from piracy and attacks.
The Red Sea crisis started on October 19 last year when Iran-backed Houthi rebels in Yemen launched attacks on cargo ships apparently linked to Israel near their coast. Countries in Europe, Asia and Africa will face the most disruption across industries and the crisis will adversely affect trade volumes in substantial ways this year, the Indian think tank noted in a recent report. The disruption is significantly affecting Indian trade, especially with the Middle East, Africa and Europe, the report said. Textile and leather companies, which operate on thin margins, are renegotiating shipping costs with buyers, affecting earnings, GTRI Founder Ajay Srivastav said.
The GTRI report called for financial support and insurance schemes to Indian companies hit by these trade disruptions. “The crisis also underscores the importance of exploring alternative maritime and land based trade routes. This includes potential investment in the Northern Sea Route and expanded land transport infrastructure,” said the report. The India-Middle East-Europe Economic Corridor (IMEC) assumes importance in this context, Srivastava added.
Increase in costs of shipping (40-60 per cent) and insurance (15-20 per cent) and delayed arrival of shipments (by up to 20 days or more) arising out of the Red Sea crisis will continue to disrupt global value chains, squeeze margins and make exports of many low margin products unviable from current locations, according to the Global Trade Research Initiative (GTRI). Added to the problem is potential cargo loss from piracy and attacks.
