Amid Red Sea crisis, exporters opting for high-cost air cargo

Vijay C Roy

Chandigarh, June 17

Amid the crisis in the Red Sea, many of exporters in the region are opting for air cargo despite higher freights cost to meet their obligation in a timely manner. According to insiders, exporters of apparel, pharmaceuticals and auto parts are opting for air cargo at times to meet the urgency.

According to exporters, it has been nearly eight months, but the crisis at the Red Sea refused to relent impacting their bottom lines.

“Amid the crisis, the freight rates have been doubled as merchant vessels takes different route to reach to the US and other European markets. The industry is not only losing precious revenue on account of higher freight cost and higher insurance premium but also the merchant vessels takes 5-6 days more to reach to the designated destination as they take different routes. So in such a scenario, at time some of the exporters are using air route to reach faster to their customers,” said Harish Dua, managing director of Ludhiana-based KG Exports.

The volume of the air cargo may be small compared to merchant vessels but it has picked up in last eight months. According to insiders, exporters of apparel are also using air cargo at times to meet the urgency besides pharmaceutical and auto parts. The major apparel hubs in the northern India are in Ludhiana, Jalandhar, Panipat, Gurugram and Noida. Punjab and Haryana alone have around 200 exporters.

For India, Red Sea is an important shipping route for goods traded to the US and European countries. Commodities such as apparel, auto parts, engineering goods, pharmaceuticals and chemicals from India pass through the route. It is estimated that about 80% of India’s merchandise trade with Europe passes through this route. So, the disruption has had a critical effect on exports from India, particularly from the northern region.

According to exporters, the crisis has not only hit their bottom lines but also hit the export orders. “If we factor the high sea freight cost which has almost doubled since the crisis, then the product doesn’t remain competitive. Moreover, many of the European countries are in crisis so both the factors combined leads to lesser orders,’” said an exporter from Haryana.

According to Danish shipper Maersk, the latest threats of escalation of violence in the Red Sea in May amid the ongoing Israel-Hamas conflict are likely to hit the shipping industry’s capacity by 15-20 per cent.

It is worth noting that the crisis started in October last year when Iran-backed Houthis seized and launched aerial attacks against dozens of merchant and naval vessels in the Red Sea.