Red Sea attacks: Rerouting of ships to push up cost, impact India’s trade

Subject :IR

Section: Places in news

Context:

Global trade, which is heavily dependent on container shipping, is in troubled waters due to the fallout of the recent attacks by Iranian-backed Houthi militants on ships passing through the Red Sea/Gulf of Aden.

Details:

Container ships are now being diverted via the Cape of Good Hope at the southern tip of Africa, resulting in a sharp rise in both the transit time and freight cost.
These ships burn a million dollars worth of fuel per trip more than they would if they went via the Suez Canal.

Consequences:

The circuitous Cape of Good Hope route, which adds about 6,000 nautical miles to a typical voyage from Asia to Europe, doubles the travel time to more than a fortnight.
As ships spend more time sailing, their turnaround time is cur-tailed.
Freight charges will double to more than $2,000 per TEU.

DOUBLE BLOW

Global Shipping were facing the drought at Panama canal and now the Red Sea crisis.
The Panama Canal is another vital link for ships from Asia heading to the Eastern Coast of the United States and Europe.

India’s trade using Red Sea route:

Exports include engineering goods, textiles, and tea, and its imports are electronics and minerals through the Red Sea and the Suez Canal.
Europe accounts for over 65 per cent of India’s coffee exports.
In the short term, insurance rates may increase. Freight charges may go up, which will have an impact on costs.
In this dynamic geopolitical situation, India is likely to emerge as an important player in strengthening the food security of the Middle East and North Africa region (MENA).

Key terms:

The Suez Canal is a man-made 193 km tiny strip of water that connects the Red Sea and the Mediterranean Sea.
The Gulf of Aden is a deepwater gulf of the Indian Ocean between Yemen to the north, the Arabian Sea to the east, Djibouti to the west, and the Guardafui Channel, Socotra and Somalia to the south.
- In the northwest, it connects with the Red Sea through the Bab-el-Mandeb strait, and it connects with the Arabian Sea to the east. To the west, it narrows into the Gulf of Tadjoura in Djibouti. The Aden Ridge lies along the middle of the Gulf and is causing it to widen about 15mm per year.
The Cape of Good Hope is a rocky headland on the Atlantic coast of the Cape Peninsula in South Africa.
- It is not the southernmost point of the African continent, but Cape Agulhas is the southernmost point.

Red Sea attacks: Re­routing of ships to push up cost, impact India’s trade