Red Sea attacks compel at least 65% of Indian exports shipments to Europe to take longer routes

NEW DELHI : At least 65 percent of Indian export shipments to Europe are taking the longer route via the Cape of Good Hope on the southern tip of Africa as cargo ships in the Red Sea continue to face the threat of attacks, sources told .

“Most exporters are looking to avoid massive premiums on insurance charges to travel through the Red Sea and the Suez Canal,” an executive from a global shipping major told.

Despite the time taken using the much longer route, Indian exporters are opting for the safer passage notwithstanding the option to pay higher insurance premiums and move through the Suez Canal with military protection. A senior government official on January 5 said that the Indian government is providing security to consignments on the high seas amid the spate of attacks on freighters in the Red Sea region.

But freight rates have also increased with ships being forced to take the longer route to avoid the Red Sea region, increasing the turnaround time by around 14 days, according to a government official.

A second official told that container prices at major Indian ports have passed the $2,500 per TEU (twenty-foot equivalent unit) mark and insurance rates for exports to Europe are also soaring regardless of which route a ship takes when traveling to Europe from India.

Shipping and insurance companies are asking Indian exporters to pay nearly equivalent charges for exports to Europe, irrespective of the route taken because of high demand.

Due to this, Indian exporters have asked the government to step in to contain costs, the second official said, adding that the government is in talks with them to come up with ideas to mitigate the issue of soaring container prices, including providing conditional credit to exporters.

According to reports on January 5 that India is mulling a variety of measures, including offering subsidies to Indian exporters to offset higher shipping costs and insurance premiums. New Delhi is also in touch with the US-led multinational coalition to ensure the safe passage of commercial vessels in the Red Sea.

The spot rate for shipping goods in a 40-foot container from Asia to northern Europe now tops $4,000, a nearly threefold jump from just before the diversions started in mid-December. Rates from Asia to North America’s East Coast have risen around 60 percent to $4,000 for a 40-foot container.