Shipping freight to go up soon as shippers avoid Suez Canal due to Houthi rebels

The circuitous route would take at least 15 days extra travel for ships from Asia to European destinations and return. The costs of containers too would go high leading to higher costs for the EXIM trade

For the first time oil cargo ships carrying crude to Mangalore refinery has hit by drone attack in the red sea two days ago causing fire. The ship however managed to leave the area unscathed.

Frequent attack on ships had forced leading shipping companies like MaeskHapag Lloyd, Mediterranean shipping company British petroleum to divert their vessels from the cost effective red sea route.  They are now taking a longer route going around the Cape of Good Hope, which is typically used for bulk cargo.

Shipping industry sources said that the charter cost for a ship, which works out to around 60,000 US dollars a day will rise as an additional 15 days will be required, which could jack up container costs 1.5 to two times to 2,000  US dollartsa container for the India-Europe route. While the impact on freight rates has not shown up in a significant way just yet, businesses are expecting an increase.

"The challenges in shipping logistics, owing to increasing attacks on ships, is likely to push freight and insurance costs and add to already high uncertainties in the global trade. We hope disruptions can be addressed quickly with coalition patrolling in the Red Sea and rule of law prevailing in international water,"  AjaySahai, director general, Federation of Indian Export Organisations (Fieo) was quoted by media reports.

Though the United states mooted the idea of joint patrolling of the red sea channel the move has suffered a setback due to cold shouldering by Saudi Arabia which has a long coastal border in the red sea channel.

India is heavily reliant on this route for trade and energy imports, and faces increased costs and security risks, and efforts are needed to diversify trade routes and enhance regional maritime security cooperation according to Global Trade Research Initiative GTRI.

"India may have to work to diversify its energy import so that it is less reliant on the Bab-el-Mandeb Strait. This includes increasing imports from other countries in the Persian Gulf, Africa, and Central Asia," the report said, adding that nearly 30% of the container traffic is routed through this strait.