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Indian exporters will experience a significant increase in shipping costs as freight lines choose to reroute around Africa and thereby avoid the now-closed Suez Canal. The conflict in the Red Sea provoked this change to a longer route around the Cape of Good Hope, which could add almost one third onto shipping times between Mundra and Rotterdam.
Experts feel that heightened shipping distance and the possibility of disruption will lead to higher freight rates, which would prove a challenge for Indian exporters as they adjust to changes in global shipping.
One major global shipper has announced that all its vessels headed for the Red Sea, because of security concerns. This decision follows in the wake of recent attacks by the Houthi militia on freight ships offshore, which have brought various shipping lines to temporarily stop their Suez Canal-bound vessels.
Maersk said it hoped there would soon be a resolution that means sailors can start using the Suez Canal and transiting through the Red Sea and Gulf of Aden again. It’s just hard to say when exactly this will happen, however.
Shashi Kiran Shetty, founder and chairman of Allcargo Logistics writes that when several shipping lines recently decided to steer clear of the Red Sea by taking longer routes around South Africa’s Cape Of Good Hope it would throw trade into turmoil.
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There will be delays; there will also be margins on top which couldn’t have been so warranted in this new Indian exports worth an estimated $ 200 billion pass through the Suez Canal annually, including a lot of manufactured goods like automotive parts, agricultural products and chemicals; textiles, readymade garments as well as pharmaceutical products. The switch to another route is likely to affect all these industries in some way or other.
Macroeconomic environment shows insufficient trade absorption capacity, freight rates unlikely to appreciate greatly. But the longer transit time around the Cape of Good Hope will undoubtedly impact sailing schedules and service reliability, leading to delays.
If shipping lines opt for the Red Sea, there would still be an impact. War surcharges may increase and that could drive up costs says Shashi Kiran Shetty, founder and chairman of Allcargo Logistics.
(“This story remains unedited by News360Express staff and is published from a syndicated feed.”)