The escalation of the conflict in West Asia, coupled with the strike by port workers on the US’s east coast has added to the logistics challenges faced by Indian exporters and may end up hurting shipments to the country’s biggest markets, trade sources and analysts say.
Movement of ships is as of now normal and has so far not been disrupted by the exacerbation of the Israel-Iran conflict and the strikes on Lebanon. The bigger challenge, however, has emerged from the US where the strike by workers on US East and Gulf coasts, chairman of Engineering Export Promotion Council Arun Kumar Garodia said.
He said that the immediate impact of the conflict escalation would be on the movement of cargoes by air, as airspace of countries where the conflict is centred in is constricted, leading to longer time to execute the shipments and and higher costs.
The strike started on October 1 at the ports through which most of India’s exports enter the US and reports say that congestion in these ports have already started. At least 45 container vessels that have been unable to unload had anchored up outside the strike-stricken East Coast and Gulf Coast ports, Reuters reported.
According to some reports, about $34 billion in cargo is currently en route to East Coast ports. Just a one-day strike could create nearly a week of congestion and if the strike reaches two weeks, congestion could extend as far as 2025.
“It is a matter of concern. Transportation costs are already high. If the strike continues for long it will affect our exports,” director general of Federation of Indian Export Organisations Ajay Sahai said.
“The strike is less than 48 hours old and is already causing delays in unloading and processing of shipments from India, affecting goods like textiles, pharmaceuticals, and auto parts,” co-founder of Global Trade Research Initiative Ajay Srivastava said
If the strike continues, shipments would need to be rerouted to the U.S. West Coast or Canadian ports, leading to higher costs and longer transit times, which may result in increased prices for consumers. Indian exporters are already facing higher freight costs and delays due to disruptions in the Red Sea route and problems in the availability of certain types of containers.
“Amid the global economic slowdown, this is adding to the worries of the Indian exporters to the U.S , India’s largest trading partner and biggest export destination. Due to the crisis, exports will be delayed which could lead to missed deadlines, contract penalties, and strained relationships with US buyers,” chairman – CII National Committee on EXIM and MD – Patton International Sanjay Budhia said.
The US is still the top export market for India with shipments of $ 77.5 billion in 2023-24, which comes to 17% of India’s total exports. Imports from the US during the period stood at $ 42.1 billion.
Garodia said hardest hit will be those who have sent out goods in CIF (Cost, Insurance and Freight) terms as they would not be able to meet the commitment made for delivery of goods at a specified port.
In CIF the seller is responsible for the goods until they reach the named port. The seller also pays for shipping, cost of loading, insurance and clearing for export.
“If operations at ports do not resume then there is a possibility that ships may discharge the containers at other ports which will create another problem of retrieving the cargo from those ports and reaching the sellers, adding to further delays and losses,” EEPC chairman said.
“Indian manufacturers who rely on these ports for imports of raw materials and intermediate goods might also experience delays in receiving essential inputs, leading to slowdown in production cycles and will contribute to higher inflation,” Budhia added..
The usual sea route from Mumbai to the US East Coast typically takes 29 to 30 days and closure of route from Suez Canal has added up to 20 days to the transit time. “The current workers’ strike will force ships to take a much longer route around the Horn of Africa and South America to reach the U.S. West Coast. This detour will increase travel time and costs by 2.5 to 3 times, adding thousands of extra kilometres for internal transport within the US,” Srivastava said.
The double whammy for the exporters occurred at a time when some relief was visible on the horizon. “The rates for shipping to the US has fallen 16-20% in the past three weeks now that might rise again,” Garodia said.
From: financialexpress
Financial News
