Watch | Economic costs of continued conflicts on the Red Sea 

watch the Red Sea disruptions and how it will impact India’s trade

Back in November in a Business Matters episode, we posed a quiz question to you on the time it would take for ships from Asia to reach Europe if they went around Africa, instead of through the shorter, Suez Canal route. This was for a discussion on climate change. We honestly didn’t expect that it would become the topic of a future episode of Business Matters. 

The Suez Canal sees cargo worth more than 15% of global trade passing through it. Ever since Houthi rebels began attacking merchant ships in the Red Sea October last following Israel’s assault on the Gaza strip, shipping traffic through the canal has been affected. 

In an IMF blogpost, the Portwatch portal estimated that the volume of trade that passed through the Suez Canal dropped by 50% year-over-year in the first two months of the year, and the volume of trade transiting around the Cape of Good Hope surged by an estimated 74% above last year’s level.

Just to give you an idea of how trade routes have changed, the IMF-Portwatch blog post that tells us that on Jan 1, 2023, the 7-day moving average in million metric tonnes via the Suez Canal and that around Africa were comparable – they were 4.52 and 3.63 respectively. Cut to March 4 of this year, that figure for Cape of Good hope was 7.63 and that for the Suez Canal was a lowly 1.8. That’s quite some divergence. 

Led by the US, a coalition of countries is now launching counterattacks against the Houthis. Even with the passage of time, there is still no sign of the conflict on the Red Sea going down. And for the first time the conflict saw a fatal attack by the Houthis – two crew members on a merchant shift died during an attack. 

What is India’s trade via Red Sea and to which countries? 

India uses the Red Sea to trade with markets in Europe, east coast of the US, and bordering countries of Africa and Asia.