The escalating threats to cargo vessels at the Red Sea has changed India’s export destinations of petroleum products as the country has started supplying more to East Asia and Africa now compared with its supplies to Europe.
India’s export of petroleum products to Europe has declined substantially in January so far owing to the rising tensions in the Red Sea, dropping to just 100 thousand barrel a day (kbd) from 350-400 thousand barrel a day in November and December. Many tankers have instead opted for the longer route via the Cape of Good Hope for the delivery which has resulted in increased shipping costs.
“Even if they export to Europe, Indian refiners prefer circumnavigating Africa,” said Viktor Katona, lead crude analyst at Kpler. “In January so far, there have been three cargoes departing from India to Europe, one diesel seemingly will try the Bab el Mandeb strait, whilst two jet fuel cargoes (Doric Courage from Jamnagar and Pacific Julia from Nayara) have opted for the longer route around the Cape of Good Hope.”
The escalating threats to cargo vessels at the Red Sea has changed India’s export destinations of petroleum products as the country has started supplying more to East Asia and Africa now compared with its supplies to Europe.
Further, the alternative route being opted by the Indian product exporters for supplies to Europe has increased their shipping cost by 60-70%.
“To take just one specific example, the route from Jamnagar to Rotterdam takes 24 days via the Suez Canal and 42 days via the Cape of Good Hope,” Katona said. “So in general for Indian product exporters the circumnavigation of Africa means shipping costs getting 60-70% higher into Europe.”
As per the Delhi-based Research and Information System for Developing Countries (RIS), India could see a nearly 7% drop in exports in FY24, amounting to around $30 billion as higher container shipping rates might prompt exporters to hold back on shipments, reports have suggested.
India exports a variety of goods via the Red Sea including petroleum products. The country’s export of petroleum products fell by 7.5% in November last year to $7.48 billion compared to $8.08 billion in November 2022, as per the latest government data. The exports were 15% down during the first eight months of the current fiscal at $65.23 billion.
“For standalone refiners such as RIL, MRPL, and CPCL, there could be some margin hit on the crude side, while on the product side, exports to EU could be impacted,” Madhavi Arora, lead economist with Emkay Global Financial Services Ltd had earlier said in a note.
Arora noted that freight rates from Asia have spiked 53% in a month and container shipping giants including oil supermajor BP have halted transit via the Red Sea or the Suez Canal.
Source:financialexpress.com