Kanpur-based exporters are holding back export consignments valued at ₹100 crore, citing concerns related to the Israel-Hamas conflict and heightened attacks on cargo ships in the Red Sea. The refusal of shipping companies to provide insurance cover, coupled with increased freight costs of 35% due to alternative routes, has impacted manufacturing costs and raised apprehensions about the safety of consignments.
The ongoing conflict between Israel and Hamas, along with intensified attacks on cargo ships in the Red Sea, has led Kanpur exporters to exercise caution, withholding export consignments totaling ₹100 crore. Shipping companies have declined to extend insurance coverage for these consignments, and the adoption of alternative routes, such as those via South Africa and Morocco, has resulted in a 35% increase in freight costs. This surge in costs is affecting the manufacturing expenses of various items, prompting industry watchers to express concerns about the safety and security of the withheld consignments.
The Red Sea route, known for being the shortest from Asia to Europe, has become a focal point for these concerns. Javed Iqbal, the regional chairman of the Council for Leather Exports, remarked that the industry had already faced challenges due to the Russia-Ukraine war, and the Red Sea attacks have further compounded the issues. Exporters are apprehensive about potential theft or destruction of consignments if sent through the Red Sea route, leading them to withhold shipments.
Kanpur, a key exporter of leather goods, readymade garments, plastic, spices, and engineering tools to 27 European countries, relies on the Bab al Mandeb strait—a narrow passage connecting the Red Sea with the Gulf of Aden. This maritime chokepoint, situated between Yemen and the Arabian Peninsula, holds significant importance for international shipping.
Recent attacks by the Houthis in the Red Sea, firing ballistic missiles at cargo ships, have escalated tensions. Shipping companies are now refusing insurance coverage for booked consignments, with some even imposing a $5200 risk surcharge. The freight cost for containers has surged from $700 to over $3000, further impacting the overall manufacturing expenses.
Sheezan Akhtar, a leading exporter, highlighted that exporters are opting for safer alternatives, such as routes through Morocco and South Africa, despite the increased costs. However, concerns persist, and exporters are holding onto consignments, anticipating an improvement in the situation.
Alok Srivastava, the convener of the Federation of Indian Export Organisation (FIEO), emphasized the serious challenges faced by exporters. With consignments worth ₹100 crore on hold, the situation has been brought to the attention of the Union government, and further impacts on exports are anticipated if the situation does not improve.
As per estimates from the Council for Leather Exports (CLE), Kanpur exports leather, leather goods, spices, plastic, and other goods worth ₹300 crore monthly to Europe. Recent trends indicate a decline in exports from Kanpur, which, between April and September this year, amounted to ₹4515 crore compared to ₹5500 crore during the same period last year.
