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IMPACT
OF THE RED SEA CRISIS
ON INDIA’S TREAD
RUBBER INDUSTRY
The persistent Red Sea Crisis, fuelled by attacks from Yemen-based Houthis on commercial shipping, is casting a shadow over the Indian business landscape, notably affecting the tread rubber sector. The Indian government has responded by joining the US-backed Combined Maritime Forces initiative, deploying naval vessels to bolster security along this crucial maritime corridor.
FEATURE
REPORT
The crisis poses a significant threat to India’s exports, poten- tially curtailing them by an estimated $30 billion during the current financial year. A substantial portion of India’s $230 billion trade with Europe, the US East Coast, and parts of West Asia and Africa relies on the Red Sea route. This situa- tion has heightened concerns among Indian tread rubber ma- nufacturers, who fear shipment disruptions.
Hyderabad’s Vamshi Rubber Ltd., a key player in the tread ru- bber industry supplying products to Turkey, anticipates a spi- ke in shipping costs driven by increased insurance premiums and the necessity of longer, alternative shipping routes. Ma- naging Director Surendra Reddy highlighted that diverting shipments through the Cape of Good Hope extends transit ti- mes by approximately 14 days, with shipping costs projected to surge by over 10% from February onwards.
The escalating freight charges are inflating raw material pri- ces, impacting the rubber industry. Paulose Varughese, Direc- tor of Midas Treads, noted that higher freight rates for both exports and imports affect not just outbound shipments but also the cost of raw materials within India. This has led to a raw material shortage, threatening to elevate prices and cause
synthetic rubbers and chemicals scarcities.
IMPACTING THE RETREADING SECTOR
Hemant Kaul, CEO of Marangoni South Asia, remarked on the broader implications for the tyre sector, including re- treading businesses. Extended transit times to the East Coast, a primary export region for India, could disrupt the supply of essential raw materials. However, Marangoni Sou- th Asia expects minimal impact on its operations, as most of its key products are either domestically produced or sour- ced from its group company, Leader Rubber South Africa. Despite the anticipated rise in import costs due to higher ocean freight rates, the company does not foresee any im- pact on its revenue, given its focus on domestic markets and limited export activities.
The Red Sea Crisis underscores the interconnectedness of global trade routes and the significant repercussions disrup- tions can have on industries such as tread rubber manufac- turing in India. Stakeholders closely monitor the situation, hoping for a resolution to secure the vital shipping lane and stabilise the sector’s operations.
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