Bottleneck: A sailing vessel near the Ebba Maersk container ship off Dubai. Shipping giant Maersk suspended the passage of vessels through a key Red Sea strait for 48 hours after Yemeni rebels attacked one of its ships. — AFP
NEW DELHI: Freight rates from Asia have spiked by 53% in a month depending on the route plus container shipping giants and oil super major British Petroleum having halted transit via the Red Sea-Suez Canal route after the attacks, the latest Freightos data shows.
The disruption assumes significance as the Bab-el-Mandeb Strait, which connects the Mediterranean Sea to the Arabian Sea via the Red Sea and the Suez Canal, is vital for 30% of global container traffic and India relies on the route to trade with parts of West Asia, Africa, and Europe.
Reports suggested that a majority of insurance companies have refused to cover shipments crossing the Red Sea after Yemen-based Houthi militants hit a Liberian-flagged ship Palatium III with an anti-ship ballistic missile, with some insurers starting to levying a US$5,200 war risk surcharge over and above the freight charges.
Speaking on the impact of higher freight costs via the Red Sea and the Suez Canal, Madhavi Arora, lead economist for Emkay Global, highlighted how it will affect the oil, gas, auto, chemicals and logistics industries.
“For India, oil, gas, the bulk of crude and liquefied natural gas come through the Persian Gulf. Hence, the Red Sea issues won’t hamper those flows much. However, Russian oil flows from the Black Sea may be affected and rerouted,” Arora said.
For the auto industry, Arora said the freight costs may increase marginally for export-oriented companies. Delay in shipments may not have as severe an impact as during the chip-shortage crisis of 2020-2023 as channel inventories have largely normalised, she said. — The Statesman/ANN
