The Red Sea conflict: Agri, textile exporters hold back shipments

The commerce department is monitoring developments on the situation at the Red Sea, amid exporters holding back their shipments owing to fears about higher freight costs due to shipping vessels being rerouted.

Such shipments include agricultural and textiles products.

The cost of freight and insurance has risen due to ships being compelled to avoid the region and take a longer route around the Cape of Good Hope.

This is because of persistent attacks by Iran-backed Houthi rebels in the Red Sea region.

“Shipments are being held back by exporters because they are feeling the pinch of additional freight costs. If this prolongs, then it is a matter of concern,” a senior government official told Business Standard, adding that containers could face delays of 12-14 days in their turnaround time although there was no shortage of containers.

“We have not got the signal yet whether exporters abroad are holding back shipments,” the official said.

While exports to the US west coast are intact, shipments to Europe, North Africa, and West Asia have been affected.

India exports goods worth $110 billion to the three regions.

The commerce department is yet to do a detailed assessment of the hit on Indian exports.

“A quantification of the delay needs to be assessed. It has not been done yet since the situation is unfolding,” the official said.

The development comes against the backdrop of the commerce secretary chairing a meeting with exporters on Thursday to discuss the crisis.

Another official said many consignments were being escorted with security in high seas with help from the Ministry of Defence due to the challenges on the Red Sea.

Separately, Danish shipping giant Maersk will divert its vessels around the Cape of Good Hope “for the foreseeable future”.

“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.