TITLE:
Red Sea Conflict: Impact on Global Trade and Indian Economy..?
CATEGORY : NEWS
CONTENT:
Recently Red Sea news has been a hot topic everywhere. Let’s see who these Houthis are and why they are attacking the ships in the Red Sea. Well, if you look at the history of the Houthis, the Houthis emerged in the 1990s as an armed group in Yemen to fight against corruption in Yemen and to oppose the then president Ali Abdullah. If you want detailed information, I've already posted about this. Click here India's position Let's understand India's position in this conflict for us in India this route is super critical this route is like a Lifeline to Europe and the West and it's vital for our energy needs also why because 20% of our exports or 200 billion worth of exports pass through this pathway and just like India many other countries have their important imports and exports passing through the Bab al Mandeb Strait. what is the immediate impact of this on world trade and what kind of businesses will be affected in India Photo source:thetime.co.uk Firstly since the ships using this region will be at risk the insurance cost for the voyage of these ships has increased Bloomberg says that for a vessel that cost $100 million the insurance cost has shot up from 0.2% per Voyage to 0.5% per Voyage so for a ship that cost $100 million the insurance cost has gone up from $200,000 to $500,000 and this means the cost of shipping has already increased. Secondly the traffic in the Red Sea has decreased so has the traffic in the Red Sea has dropped by 40% over the last 3 weeks so the question is where are this 40% of ships going if not through the Red Sea well like we saw on the map if not through the Swiss canal and the Bab al Mandeb Strait, the ships will have to go all the way down to the Cape of Good Hope so again the shipping costs are increasing due to both more time and fuel needed to ship the goods using longer routes Thirdly there is something called the Panama crisis largest traffic jams are taking place it's not the usual type of blockage it's a traffic jam in the sea more than 100 ships have been stuck in the past 40 years you've never seen anything like this Those who don't know this is the straight between North America and South America and it allows 6% of the world's Maritime Commerce to pass through it has about 38 to 40 ships passing on a day-to-day basis but as of December 50% of the ships have stopped using this route why because large ships require a certain depth to sail and if the depth of the water goes below a certain level the large ships won't be able to sail. This region due to less rainfall the depth of the sea has gone down from 27 M to below 25 M and these large ships require a minimum of 26 M to operate this is a reason why huge container vessels have to use an alternate route which was the route via Malacca strait and then via Bab al Mandeb and Suez Canal, and this had already increased the cost of shipping from China to North and South America by a large extent. Now even the Swiss canal route has become dangerous so the ships will have to take this route via Cape of Good Hope to then go to South and North America this is the impact of the Houthi Rebel attack on the world trade if this is very very clear to you Impact on Indian businesses Let's come to its impact on Indian businesses a number of the world's biggest oil and cargo shippers have rerouted hundreds of ships to avoid the violence. Firstly, because the shipping routes to Europe and the us have become longer the overall shipping cost of Indian Goods to these markets has already increased by 20 to 40% and the European Union is India's second largest export destination so the slowing demand from Europe will impact India's labour-intensive sectors like textile Gems and Jewellery exports secondly, to be more specific let's come to Kanpur exports leather plastic and spices worth 300 crores every single month to Europe and last year India exported 5,500 crores worth of goods to Europe and because of the situation already 100 crores worth of goods have been held back thirdly, India exported 38524 crore or 4.7 billion worth of Basmati in FY23 and according to the former president Vijay Sethia his All India Rise Exporters Association, the freight cost for India's basmati rice exports to countries around the Red Sea has jumped from $600 per 20 ton container to $2,000 In conclusion, the consequence of the Red Sea war on India and World Trade so now what's happening us has already started attacking the Houthis, but if Iran and Russia step into this war instead of just backing them it
Recently Red Sea news has been a hot topic everywhere. Let’s see who these Houthis are and why they are attacking the ships in the Red Sea. Well, if you look at the history of the Houthis, the Houthis emerged in the 1990s as an armed group in Yemen to fight against corruption in Yemen and to oppose the then president Ali Abdullah. If you want detailed information, I’ve already posted about this. Click here
India’s position
Let’s understand India’s position in this conflict for us in India this route is super critical this route is like a Lifeline to Europe and the West and it’s vital for our energy needs also why because 20% of our exports or 200 billion worth of exports pass through this pathway and just like India many other countries have their important imports and exports passing through the Bab al Mandeb Strait.
what is the immediate impact of this on world trade and what kind of businesses will be affected in India
Photo source:thetime.co.uk
Firstly since the ships using this region will be at risk the insurance cost for the voyage of these ships has increased Bloomberg says that for a vessel that cost $100 million the insurance cost has shot up from 0.2% per Voyage to 0.5% per Voyage so for a ship that cost $100 million the insurance cost has gone up from $200,000 to $500,000 and this means the cost of shipping has already increased.
Secondly the traffic in the Red Sea has decreased so has the traffic in the Red Sea has dropped by 40% over the last 3 weeks so the question is where are this 40% of ships going if not through the Red Sea well like we saw on the map if not through the Swiss canal and the Bab al Mandeb Strait, the ships will have to go all the way down to the Cape of Good Hope so again the shipping costs are increasing due to both more time and fuel needed to ship the goods using longer routes
Thirdly there is something called the Panama crisis largest traffic jams are taking place it’s not the usual type of blockage it’s a traffic jam in the sea more than 100 ships have been stuck in the past 40 years you’ve never seen anything like this
Those who don’t know this is the straight between North America and South America and it allows 6% of the world’s Maritime Commerce to pass through it has about 38 to 40 ships passing on a day-to-day basis but as of December 50% of the ships have stopped using this route why because large ships require a certain depth to sail and if the depth of the water goes below a certain level the large ships won’t be able to sail.
This region due to less rainfall the depth of the sea has gone down from 27 M to below 25 M and these large ships require a minimum of 26 M to operate this is a reason why huge container vessels have to use an alternate route which was the route via Malacca strait and then via Bab al Mandeb and Suez Canal, and this had already increased the cost of shipping from China to North and South America by a large extent.
Now even the Swiss canal route has become dangerous so the ships will have to take this route via Cape of Good Hope to then go to South and North America this is the impact of the Houthi Rebel attack on the world trade if this is very very clear to you
Impact on Indian businesses
Let’s come to its impact on Indian businesses a number of the world’s biggest oil and cargo shippers have rerouted hundreds of ships to avoid the violence.
Firstly, because the shipping routes to Europe and the us have become longer the overall shipping cost of Indian Goods to these markets has already increased by 20 to 40% and the European Union is India’s second largest export destination so the slowing demand from Europe will impact India’s labour-intensive sectors like textile Gems and Jewellery exports
secondly, to be more specific let’s come to Kanpur exports leather plastic and spices worth 300 crores every single month to Europe and last year India exported 5,500 crores worth of goods to Europe and because of the situation already 100 crores worth of goods have been held back
thirdly, India exported 38524 crore or 4.7 billion worth of Basmati in FY23 and according to the former president Vijay Sethia his All India Rise Exporters Association, the freight cost for India’s basmati rice exports to countries around the Red Sea has jumped from $600 per 20 ton container to $2,000
In conclusion, the consequence of the Red Sea war on India and World Trade so now what’s happening us has already started attacking the Houthis, but if Iran and Russia step into this war instead of just backing them it will again lead to a full-fledged war and as far as I know since the US has come in the possibility of this happening is very very less but in this crazy world fortunately or unfortunately nothing is impossible…..
