Red Sea attacks, US retaliation pushed up Indian petroleum freight costs to EU & UK by 87-95%

Freight analytics firm Vortexa said nearly all tankers were choosing to divert around the Cape of Good Hope, adding that most impacted by this detour were ships from India’s west coast and the Middle East.

Indian Navy's stealth frigate INS Tarkash in the Red Sea | Representative image | ANI

Freight rates for ships carrying petroleum products from India’s western coast to the UK and Europe have increased in the range of 87-95 percent due to the ongoing attacks on ships in the Red Sea and the resultant detour around the Cape of Good Hope, according to freight analytics company Vortexa.

In a note released Tuesday, an analyst from Vortexa said that tanker transits through the Bab-el-Mandeb strait, which connects the Red Sea to the Arabian Sea and the Indian Ocean, have continued to decline since mid-December, in reaction to the attacks on ships traversing the region.

“Southbound transits have largely stopped, hovering at slightly over one transit per day on a moving average basis,” Mary Melton, a freight analyst at Vortexa, said in the note. “Northbound CPP (clean petroleum product) tanker transits slightly recovered going into the New Year but declined precipitously following the US/UK-led strikes on 12 January.”

The note added that while some tankers had initially adopted a “wait and see” approach in the Arabian Sea, now “virtually all” have made the decision to travel around the Cape of Good Hope (COGH) instead.

“The flow most affected by these northbound diversions are middle distillates from West Coast (WC) India or the Middle East heading to Europe,” the note said. Middle distillates refer to a range of products refined from crude oil.

The attacks on this crucial trade route have been perpetrated by Yemen’s Houthi group, which have made ships their target following Israel’s attack on Gaza.

India’s petroleum surge

Incidentally, since the outbreak of the Russia-Ukraine war, Europe has emerged as a big market for India’s petroleum exports. According to reports, India’s petroleum exports to Europe surged 572 percent between January 2022 – just before Russia attacked Ukraine—and April 2023. That trade now stands to become much more expensive.

“Freight rates from India-to-UK Cont (UK and continental Europe) for these vessel classes have increased 87 percent and 95 percent, respectively (depending on the size of tanker), since US/UK strikes,” the Vortexa note said.

“The transit via the COGH instead of via the Red Sea adds around 75 percent in tonne-miles to a voyage from Sikka (in Gujarat) to Europe,” the report added.

(Edited by Tikli Basu)