Red Sea Crisis: Indian tea exporters to Europe and the US face huge losses

The export of tea from India to Europe and the United States is suffering badly, exporters are expecting big losses due to huge increases in transport costs due to the Red Sea crisis.  Also, importers from the US and European countries may prefer to buy tea from Kenya rather than India for new contracts. Container ships are being diverted around South Africa to avoid the Suez Canal following recent attacks on several ships transiting the Red Sea by the Houthis, an Iran-backed rebel group. Longer voyages add at least 15 days to the delivery time of all westbound cargo ships  from India, leading to higher container rates. 

Badly impacted

 “Tea exports to all of Europe and the United States are suffering greatly. In addition to the need for extra days  for deliveries, the  availability of containers has also decreased significantly, which has led to a huge increase in sea freight rates. Exporters who are currently supplying tea to buyers in the US and Europe under earlier contracts will suffer due to the increase in freight costs”, Anshuman Kanoria, president, Tea Exporters Association of India, told Business Line.  Businessmen usually sign contracts in advance. And most  export contracts are usually CNF contracts where the sellers must arrange and pay for the ships that will take the goods to their contracted destination. “Obviously, business is suffering from the increase in container costs and longer delivery times. With the Christmas holidays in most parts of Europe and the US, the real impact will be felt as soon as everyone opens  after the first week of January,” said Dipak Shah, president of Tea Exporters Association of South India. Regarding the new contracts likely to be signed after the holiday season, the big question  is what will actually happen. And it is possible that people  prefer to buy tea from Kenya rather than India”, Shah told Businessline.  A decrease of 10 percent  India’s tea exports are likely to decline by around 10 percent this year compared to last year, mainly due to a significant drop in exports to Iran. 

The country’s tea export was 231.08 million kilograms (mkg) in the calendar year 2022. “The problems of  the Red Sea affect the export of all Indian goods. Insurance companies have announced that they will not cover the insurance because they consider the entire Red Sea zone as a conflict zone. After this, no ship will make the route. between the Red Sea and Suez Canal. Indian exports through the Red Sea have come to a complete halt,” said a shipping expert who asked not to be named.

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