The Red Sea shipping crisis
What is the Red Sea shipping route?
The Red Sea is a crucial route for container shipping and international commerce. Being the fastest route between Europe and Asia, nearly 15% of the world’s shipping traffic travels through this strategic route. The route links the Indian Ocean with the Mediterranean Sea via the Suez Canal.
What has been happening in the Red Sea?
Since late 2023 until present (January 2024, at the time of writing), the Red Sea has experienced a surge in regional tensions as a result of larger geopolitical conflicts which has affected this vital trade route.
As of January 15, there have been 37 incidents against ships in the Red Sea.
These attacks by Yemeni Houthi rebels in retaliation of the conflict in Gaza are concentrated near the Bab al-Mandab Strait have significantly disrupted shipping operations, and are affecting the shipping industry of India as well.
How is it impacting India?
In India, the on-going crisis has resulted in an increase of 2.5 times in freight rates. Further, it has also become harder to obtain insurance for shipments as many private insurers have stopped offering insurance due to lack of underwriting support, while others have increased rates by up to 1% of the value of the ship for vessels that travel through the Suez Canal and even for vessels that take the longer route around the Cape of Good Hope.
What’s being done about it?
In response, the Government of India is considering measures such as easing export credit, keeping a check on insurance rates and increasing defence surveillance.
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