Red Sea Crisis: Indian Shippers Face Soaring Costs and Extended Transit Times

LSEG Shipping Research's report indicates a 110 per cent increase in cost for Aframax tankers — very large oil tankers with a deadweight between 80,000 and 120,000 metric tonnes — and a 35 per cent rise for large container vessels from Asia to Northwest Europe.

The crisis stems from Houthi rebel attacks in the Red Sea following the Israeli-Palestinian war, which disrupted global supply chains.

As per the report, an average monthly transit through the Suez Canal from June to November 2023 was seen at 1,914. This dropped to 1,672 in December, a 12.6 per cent dip in transits and January month-to-date transits are assessed at 947 as of January 22, which translates to a 32.6 per cent decline. "Daily container vessel traffic within the Red Sea has dropped by almost 60 per cent since mid-December, with the larger container ships being the most responsive to avoid the region as their transits have declined by over 80 per cent," the report said.

Apart from affecting exports and imports, an increased insurance premium for covering the ships travelling through the disturbed route will put an extra burden on their expenses. As per the data available on IUMI website, global marine insurance premiums in 2022 totalled $35.8 billion. Again, as per General Insurance Council, for FY 2023-24, as on November 2023, domestic marine premium (including marine war premium) stands at Rs 3,353 crore.

However, the government is confident that it would not affect the nation as it is closely monitoring the situation. "As far as insurance companies are concerned, most insurers, in fact, are issuing advisories against charting the Red Sea waters — the most convenient route for Indian trade to the West," said an official in the government.