1,000 Days Of Red Sea Crisis: Why Indian Exporters Are Still Paying The Price

The Red Sea shipping crisis has completed 1,000 days, with Indian exporters continuing to face higher freight, insurance and working-capital costs as attacks on commercial vessels force shipping companies to take longer routes around Africa, according to the Global Trade Research Initiative (GTRI).

The crisis began on November 19, 2023, when Yemen’s Houthi movement seized the Galaxy Leader and its 25 crew members.

The group initially targeted vessels linked to Israel, later expanding attacks to ships associated with the US and UK.

More than 100 merchant vessels have since been attacked or threatened, while several ships have been sunk and seafarers killed.

Suez Route Remains Under Pressure

Although some shipping companies have cautiously resumed selected Suez Canal services, the route remains unsafe.

Maersk and Hapag-Lloyd began returning some services in July and August, but an August 11 attack on the Egyptian-owned Tihamah, which reportedly killed four crew members and two rescuers, underscored the continuing risks.

Suez Canal traffic remains 60-70% below pre-crisis levels, with many container vessels continuing to travel around the Cape of Good Hope.

The longer route adds around 10-14 days to voyages and absorbs an estimated 5-7% of global container capacity.

Freight rates remain roughly 25-40% above normal levels, while vessels also face higher war-risk insurance costs.

Indian Exporters Face Rising Costs

India is particularly exposed because around 80% of its merchandise trade with Europe normally uses the Red Sea-Suez corridor.

Markets served through the route account for around half of India’s exports and 30% of its imports.

The diversion around the Cape of Good Hope adds thousands of kilometres to voyages and increases fuel, freight, insurance and inventory expenses.

At the peak of the disruption, freight rates on some India-Europe and India-US routes rose by 200-400%, while longer transit times also delayed payments and locked up exporters’ working capital.

MSME exporters have been particularly vulnerable because many operate on thin margins and cannot easily absorb higher logistics costs.

Textiles, garments, engineering goods, chemicals, leather, carpets, rice, spices, grapes and marine products are among the exposed sectors. Imports of European machinery, chemicals, auto components, metals and medical equipment have also become costlier and slower to arrive.

GTRI Calls For Long-Term Response

GTRI Founder Ajay Srivastava said the prolonged disruption shows that military intervention alone cannot restore confidence among commercial operators.

“The Red Sea crisis has completed 1,000 days without a durable solution, showing that military action can intercept missiles but cannot restore commercial confidence,” Srivastava said.

He added that the crisis had made trade with Europe, the UK, North Africa and the US East Coast slower and more expensive, particularly hurting MSMEs through higher freight, insurance and working-capital costs.

“As shipping chokepoints are growing, India must treat maritime insecurity as a continuing trade risk and strengthen domestic shipping capacity, trade finance, naval protection and alternative transport corridors,” Srivastava said.