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regular-article-logo Friday, 22 November 2024

Industries brace for delays amid continuous disruption of Red Sea logistics route

The Global Trade Research Initiative (GTRI) said companies relying on just-in-time manufacturing processes can be particularly vulnerable as they maintain low inventory levels and depend on the timely arrival of components and finished products

Our Special Correspondent New Delhi Published 31.01.24, 10:33 AM
Houthi followers during a parade to show support to Houthi strikes on ships in the Red Sea in Sanaa, Yemen, on Monday.

Houthi followers during a parade to show support to Houthi strikes on ships in the Red Sea in Sanaa, Yemen, on Monday. Reuters

The continued disruption of the Red Sea logistics route could impact sectors such as electronics, automobiles, chemicals, consumer goods, pharmaceuticals, plastics, textiles and machinery.

The Global Trade Research Initiative (GTRI) said companies relying on just-in-time manufacturing processes can be particularly vulnerable as they maintain low inventory levels and depend on the timely arrival of components and finished products.

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Components and finished products are often shipped through the Suez Canal to reach different markets, and disruptions can lead to delays in manufacturing and increased costs, it said.

Attacks by Houthi rebels on commercial ships have disrupted the global supply chains. The immediate ripple effects are seen in increased freight costs, mandatory war risk insurance and significant delays due to rerouting.

“The adverse impact will multiply if the disruption continues beyond a few more weeks as it will impact not only trade but local productions of many industries,” GTRI co-founder Ajay Srivastava said.

He said that average container spot rates have more than doubled since early December 2023. Basmati rice exporters have to pay $2,000 per 20-tonne container for destinations around the Red Sea, a 233 per cent increase.

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