India is keeping a keen watch on the developments in the Red Sea, as the Houthis continue their attacks on cargo ships, though the disruptions caused have not majorly hit the country’s trade yet, officials have said.

With all major shipping lines temporarily stopping their operations in the Red Sea route and diverting cargo via the Cape of Good Hope, exports to the EU and parts of Africa, Asia and the US, could be affected if the situation persists as freight rates are already spiralling, some exporters pointed out. 

“Right now we have not received any major complaints on exports getting hit because of trouble in the Red Sea. Basmati exporters are facing some issues but they are managing to export. If the situation continues to be volatile, then trade will definitely be affected. We are watching the situation carefully,” a government official told businessline.

At risk

An estimated $225-230 billion of India’s exports– to the EU, the East Coast of US, African countries such as Egypt, Eritrea and Djibouti, and some Middle East countries– could be at risk if the situation in the Red Sea does not get contained.

The Iran-backed rebel group Houthi started attacking cargo in the Red Sea after the start of the Israel-Hamas war in October to declare their support for Hamas.

Some exporters, who ship their goods via the Red Sea, are holding on to their consignments waiting for the uncertainty to end, pointed out Ajay Sahai, DG, Federation of Indian Export Organisations (FIEO). “Some exporters apprehensive  about the safety of their cargo in the Red Sea are not shipping their goods for now. Buyers, too, are sending instructions to exporters asking them not to take chances. They are waiting for the situation to normalise,” Sahai said.

Uncertainty reigns

With the Houthis attacks continuing, it remained to be seen when the big shipping lines would start their operations in the Red Sea. “Maersk had said that it will take a call on resuming operations in the Red Sea very soon. But with the Houthis claiming an attack on a cargo ship very recently, it is uncertain when that would happen,” Sahai said.

It is not just rice that may get affected because of the disruptions but a variety of items that are shipped in containers, such as cars, machinery, chemicals, readymade garments and footwear, run a risk.

“So far no immediate impact we have observed...One industry which has got affected I am told is rice exports, but more details will be known once we get this December (export) figures,” Commerce & Industry Minister Piyush Goyal said on Thursday.

Shipping costs have already started spiralling and some quotes coming in for January 2024 are almost double the normal, a Delhi-based exporter said.

“For instance, for sending basmati shipment from Mundra to a port in Saudi Arabia, the price for a  20 feet container has gone up to $1500 from $800. For Europe, it has gone up to $4000 from $ 2000,” the exporter said.

With the US-led coalition now trying to build a safe shipping route in the Red Sea, there are hopes that the situation could improve, the exporter added.

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