Global Rice News

Houthi Attacks Disrupt Trade Routes for Rice Exporters

The recent escalation of tensions in the Red Sea has led to a decrease in demand for India’s Basmati rice, impacting rice exporters from Pakistan and causing disruptions in the global trade routes. Shippers are now avoiding the Red Sea due to attacks by Iranian-backed Houthis, forcing them to take a longer and more costly route around the Cape of Good Hope in Africa.

Impact on Rice Exporters

As a result, exporting Basmati rice from India has become a challenge for rice suppliers. Freight costs have significantly increased, with some shipments experiencing delays of up to half a month. This has led to higher logistic costs and a decline in profits for rice exporters from Pakistan.

India, the world’s biggest rice exporter, ships over 4.5 million tonnes of basmati rice annually, with a significant portion passing through the Red Sea. Buyers are now hesitant to purchase at higher prices, leading to a fall in rice prices in the local market.

The disruptions in the Red Sea have not only affected rice exporters but also impacted other sectors of trade. Shipments of tea, spices, grapes, and buffalo meats from India have been disrupted, resulting in losses for exporters. Imports of fertilisers, sunflower oil, machinery components, and electronic goods to India have also been delayed, raising concerns about higher costs for consumers.

Overall Trade Impact

India heavily relies on the Red Sea route for its trade with Europe, North America, North Africa, and the Middle East. The disruptions are expected to cost the country more than $30 billion in exports for the fiscal year, resulting in a decline in trade and a potential slowdown in food inflation.

Shipping prices have increased, with the average price of transporting a container rising by 161 percent. The chaos in the Red Sea has led to concerns about the safety of ships, with several vessels being attacked or hijacked. India has responded by increasing its maritime presence in the Arabian Sea.

Impact on Imports and Exports

While there is no disruption in oil flows, other imports have been affected. The supply of sunflower oil has become tight due to rerouting of vessels, leading to increased freight costs. Shipments of fertilisers have been delayed, but the government has assured that there will be no shortage.

Rice exporters from Pakistan are also facing challenges, with higher freight costs and delays impacting exports of buffalo meat. Tea exports have also been affected, with higher logistic costs and longer transit times.

The crisis in the Red Sea is expected to prolong, leading to continued disruptions in the supply chain and delayed containment of inflation. The government has set up a panel to monitor the situation.

Source: Al Jazeera