Energy cost key worry- The New Indian Express

Express News Service

NEW DELHI: The disruption of container traffic around the Bab-el-Mandeb Strait, a crucial shipping route connecting the Mediterranean Sea to the Indian Ocean, could severely impact Indian trade and economy.

This route is used for over 50% of trade and commerce by India with most of its crude oil and LNG imports coming through this narrow strait. India’s exports to Europe, Gulf countries and Africa also pass through this sea route.

The Strait is one of the world’s major trade arteries through which 30% of global container traffic and significant amounts of oil and gas vessels pass. Recent attacks by Houthi militants on container ships passing via this route has forced major shipping companies like Maersk, MSC (Mediterranean Shipping Company), Hapag-Lloyd, and CMA CGM (Compagnie Maritime d’Affretement – Compagnie Générale Maritime) to avoid the Bab-el-Mandeb Strait disrupting the global trade.

“The strait is a vital route for India’s trade with Middle East, Africa, and Europe. If the strait is blocked, it could lead to disruptions in India’s supply chains, which could hurt its economy,” said Ajay Srivastava, founder of Global Trade Research Initiative (GTRI). The immediate impact on India could be increased energy costs as it may have to use longer routes around the Cape of Good Hope. Increased risk could lead to higher insurance premiums and freight rates, impacting traders.

Brent crude oil prices have crossed $78 a barrel after touching a low of $73.24 last week. British oil major BP on Monday said it will temporarily reroute tankers to avoid Red Sea because of attacks on Ships by Houthi rebels from Yemen.

“The alternative route via Cape of Good Hope will add 10-14 days to voyage time and about 30% to the cost. The risk premium of ships have gone up, marine insurance of cargo is moving up and war risk surcharge is in the offing,” says Ajay Sahai, director general and CEO of Federation of Indian Exporters Organization (FIEO). Sahai expressed hope that the coalition of countries will carry out patrolling in the Southern Red Sea to restore normalcy shortly, else supply chain disruptions will impact the global economy.

Srivastava feels India should diversify its energy imports so that it will be less reliant on Bab-el-Mandeb Strait. This includes rising imports from other countries in the Persian Gulf, Africa, and Central Asia. He also suggests that India must develop alternative routes such as the deep water port in Chabahar, Iran.

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<br /> NEW DELHI: The disruption of container traffic around the Bab-el-Mandeb Strait, a crucial shipping route connecting the Mediterranean Sea to the Indian Ocean, could severely impact Indian trade and economy.</p> <p>This route is used for over 50% of trade and commerce by India with most of its crude oil and LNG imports coming through this narrow strait. India’s exports to Europe, Gulf countries and Africa also pass through this sea route.</p> <p>The Strait is one of the world’s major trade arteries through which 30% of global container traffic and significant amounts of oil and gas vessels pass. Recent attacks by Houthi militants on container ships passing via this route has forced major shipping companies like Maersk, MSC (Mediterranean Shipping Company), Hapag-Lloyd, and CMA CGM (Compagnie Maritime d’Affretement – Compagnie Générale Maritime) to avoid the Bab-el-Mandeb Strait disrupting the global trade.googletag.cmd.push(function() {googletag.display(‘div-gpt-ad-8052921-2’); });</p> <p>“The strait is a vital route for India’s trade with Middle East, Africa, and Europe. If the strait is blocked, it could lead to disruptions in India’s supply chains, which could hurt its economy,” said Ajay Srivastava, founder of Global Trade Research Initiative (GTRI). The immediate impact on India could be increased energy costs as it may have to use longer routes around the Cape of Good Hope. Increased risk could lead to higher insurance premiums and freight rates, impacting traders.</p> <p>Brent crude oil prices have crossed $78 a barrel after touching a low of $73.24 last week. British oil major BP on Monday said it will temporarily reroute tankers to avoid Red Sea because of attacks on Ships by Houthi rebels from Yemen.</p> <p>“The alternative route via Cape of Good Hope will add 10-14 days to voyage time and about 30% to the cost. The risk premium of ships have gone up, marine insurance of cargo is moving up and war risk surcharge is in the offing,” says Ajay Sahai, director general and CEO of Federation of Indian Exporters Organization (FIEO). Sahai expressed hope that the coalition of countries will carry out patrolling in the Southern Red Sea to restore normalcy shortly, else supply chain disruptions will impact the global economy.</p> <p>Srivastava feels India should diversify its energy imports so that it will be less reliant on Bab-el-Mandeb Strait. This includes rising imports from other countries in the Persian Gulf, Africa, and Central Asia. He also suggests that India must develop alternative routes such as the deep water port in Chabahar, Iran. Follow The New Indian Express channel on WhatsApp<br />