Red Sea disruption taking a toll on foreign trade
Rising shipping, and insurance costs and delayed arrival of shipments will continue to affect global value chains, squeeze margins, and make exports unviable from current locations: GTRI
Surging Costs
- Shipping costs rose 40-60%
- Over 20-day delay due to rerouting
- Higher insurance premiums by 15-20%
- Potential cargo loss from piracy and attacks
New Delhi: With escalating everyday attacks and no end in sight, the Red Sea crisis will adversely impact trade volumes in substantial ways in 2024, according to the report of economic think tank GTRI.
The Global Trade Research Initiative (GTRI) said that rising shipping, and insurance costs and delayed arrival of shipments will continue to disrupt global value chains, squeeze margins, and make exports of many low-margin products unviable from current locations. Countries in Asia, Africa, and Europe will face the most disruption across industries, it added.
It said that the disruption is significantly impacting Indian trade, especially with the Middle East, Africa, and Europe. India, heavily reliant on the Bab-el-Mandeb Strait for crude oil and LNG imports and trade with key regions, faces substantial economic and security risks from any disruption in this area.
About 65 per cent of India’s crude oil imports in FY23, valued at $105 billion, from countries like Iraq, Saudi Arabia, and others, likely passed through the Suez Canal.
For overall merchandise trade with Europe and North Africa, about 50 per cent of imports and 60 per cent of exports, totalling $113 billion, might have used this route, it said.
“With escalating everyday attacks and no end in sight, the Red Sea crisis will adversely impact trade volumes in substantial ways in 2024,” the report noted. This conflict is leading to increased shipping costs (40-60 per cent) and delays due to rerouting (upto 20 days more), higher insurance premiums (15-20 per cent), and potential cargo loss from piracy and attacks, it said.
