Red Sea Crisis: Costs have gone up, crisis may deepen, says official

NEW DELHI : Disruptions along the Red Sea trade route have begun pushing up shipping and insurance costs as shippers have begun taking longer routes fearing further attacks, a senior government official said Friday.

This comes a day after Commerce Secretary Shri Sunil Barthwal met shippers and exporters to assess the impact of the attacks on the critical Red Sea trade route.

The official said the crisis could deepen going forward after the current level of inventory gets used up in a month’s time. “There is no shortage of containers but turnaround time has increased,” the official said.

Meanwhile, container shipping giant Maersk on Friday said it is diverting all vessels from Red Sea routes around Africa’s Cape of Good Hope for the foreseeable future, warning customers to prepare for significant disruption.

Another official said: “During the last few days, exporters are holding back consignments due to rising costs. Exporters of mostly low value high volume consignments such as textiles are being held back due to rising freight rates. The charges are even higher from the eastern ports of the country… that is the feedback we are getting. Each wing of the government is looking into it and there will be an impact if the problem persists. The drought in Panama was also discussed but there has not been an impact on India as of now.”

Shippers across the world are switching away from the Red Sea — and so the shortest route from Asia to Europe via the Suez Canal — after Iranian-backed Houthi militants in Yemen stepped up attacks on vessels in the Gulf region to show their support for Palestinian Islamist group Hamas fighting Israel in Gaza.

The trip round Africa can add about 10 days to journey times and requires more fuel and crew-time, jacking up shipping costs. Denmark’s Maersk had said earlier this week it would pause all vessels bound for the Red Sea following an attack on one of its ships by Houthi militants, and has since begun redirecting ships around Africa.

“The situation is constantly evolving and remains highly volatile, and all available intelligence at hand confirms that the security risk continues to be at a significantly elevated level,” Maersk said in a statement on Friday. As a result, the company will divert all Maersk vessels around the Cape of Good Hope “for the foreseeable future”.

The Indian Navy said earlier this week that task groups of frigates and destroyers had been deployed in the central and northern Arabian Sea to assist merchant vessels passing through the region. “Aerial surveillance by long-range maritime patrol aircraft and RPAs (Remotely Piloted Aircraft) has been enhanced to have a complete maritime domain awareness,” the statement, issued on Sunday, said.

Earlier this week, the US and eleven other countries issued a joint statement reiterating a call for an end to Houthi attacks in the Red Sea.