Red Sea crisis : Kanpur exporters hold back ₹100 crore-worth consignments

NEW DELHI : Kanpur exporters are holding back export consignments worth ₹100 crore due to the Israel-Hamas Conflict and attacks on cargo ships in the Red Sea. Shipping companies have refused to provide insurance cover, and alternative routes have increased freight costs by 35%. The situation has impacted the manufacturing cost of items and has raised concerns about the safety and security of the consignments.

Apprehensive Kanpur exporters are holding back export consignments worth ₹100 crore in the background of the Israel-Hamas conflagration, and the Houthis stepping up attacks on cargo ships in Red Sea – a major sea trade route.

The Houthis are retaliating against Israeli action in Gaza. Meanwhile, shipping companies have refused to extend any insurance cover for the consignments, and use of alternative routes such as South Africa and Morocco, has increased the freight by 35%, which has impacted the manufacturing cost of items, industry watchers said.

The Red Sea route is the shortest from Asia to Europe. Regional chairman of council for leather exports Javed Iqbal said the export has been impacted adversely. “The industry was faced with difficulties due to the Russia-Ukraine war, but the attacks in the Red Sea have further compounded the issue,” he said, adding “exporters fear that the consignment would be robbed or destroyed in case it were sent through the Red Sea route. They are holding the consignments back.”

Apart from leather and leather items, Kanpur exports readymade garments, plastic, spices, engineering tools to 27 European countries using the Bab al Mandeb or ‘gate of tears’, a narrow strait that connects Red Sea with Gulf of Eden. It is a critical maritime choke point situated between Yemen and the Arabian peninsula, and the strait is of high importance for international shipping.

The Houthis in the last few weeks have attacked cargo ships firing ballistic missiles in the strait. Imityaz Ahmed, who is in the cargo business, said shipping companies have flatly refused to provide any insurance cover for consignments booked, and some of them have even started asking for $5200 as risk surcharge.

“Around 20 to 40-foot-long containers are used, and earlier the freight was $700 per container. Now it has jumped to $3000 plus surcharge,” he said.

Sheezan Akhtar, a leading exporter of horse gear, said exporters are largely playing safe, and holding onto consignments, waiting for the situation to improve. “As of now, the consignments are being sent through Mocorrco and South Africa at higher freight. It is not only long but also costly,” he said.

Convener of Federation of Indian Export Organisation (FIEO) Alok Srivastava said that the exporters are facing serious trouble. “Consignments of no less than 100 crore are on hold because of the attacks on the Red Sea route. We have brought the situation in the notice of the Union government. If the situation doesn’t improve, exports will be impacted further,” he added.

Kanpur exports, as per CLE estimates, leather, leather goods, spices, plastic and other goods worth ₹300 crore every month to Europe. Of late the exports were going down from Kanpur, which between April and September this year exported goods worth ₹4515 crore. During the same duration last year it was ₹5500 crore.