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Business News/ Industry / Red sea trade disruptions to affect the fertiliser, capital goods sectors the most: Crisil report
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Red sea trade disruptions to affect the fertiliser, capital goods sectors the most: Crisil report

The crisis around the Red Sea due to the Houthi rebels' attacks has led to trade disruptions around the Suez Canal. The fertiliser and capital goods will be the most affected sectors if the situation persists for longer duration

Houthi rebels' attacks in the Red Sea have led to significant trade disruptions. India's fertiliser and capital goods sector might be affected because of the crisis if it remains for a longer duration. (Mint)Premium
Houthi rebels' attacks in the Red Sea have led to significant trade disruptions. India's fertiliser and capital goods sector might be affected because of the crisis if it remains for a longer duration. (Mint)

The Houthi rebels' attacks in Yemen to pressurise Israel to stop its offensive against Hamas in Gaza have wider implications for global trade via the Suez Canal. According to Crisil, out of all the sectors, India’s trade of fertilisers and capital goods has been affected the most because of Houthi rebels' attacks in the Red Sea. Whereas, trade in sectors like metals and textiles are the least affected sectors because of the Red Sea crisis.

Also Read: Red Sea crisis: Canada asks Beijing to influence Houthis, 'It's in China's interests'

Capital goods sector: Delayed deliveries may contribute to slowdown in order conversions

The report pointed out that a sustained disruption in trade routes may lead to extended delays in the delivery of goods, hence impacting players within the capital goods sector. The trade disruptions can also lead to an undesirable inventory build-up that may exert pressure on the efficiency of companies in the capital goods sector. Delayed deliveries of products can also contribute to a slowdown in order conversions. 

Also Read: Red Sea Crisis leads shipping rates to spike; Should you Buy, Sell or Hold the shipping stocks?

Fertilisers: Import of key product MOP severely affected

The disruption in trade because of the Red Sea conflict has significantly impacted fertiliser exports to India. According to the CRISIL report, the key fertiliser muriate of potash (MOP), from Jordan and Israel has been majorly affected. India imports around 10-15% of MOP from Israel, whereas 25-30% of it comes from Jordan. However, the government has assured that it has maintained a sufficient buffer for fertilisers.

Also Read: Red Sea crisis may spike freight cost for corporates by 30%: Report

Impact on crude oil supply

India’s major chunk of crude oil supply comes from Russia (37%), Iraq (21%) and Saudi Arabia (14%). The report says that the crisis has a 'medium' impact on India's crude oil supply. Despite the nominal impact on the oil supply, there has been an increase in freight and insurance costs, highlighted by CRISIL in its report. 

Moreover, the rise in crude prices might impact incremental spreads observed by the oil marketing companies in the domestic market. The tighter shipping markets may also lead to a negative impact on Indian exports of crude oil products. According to the report, sectors like pharmaceuticals and shipping will have a medium impact on the Red Sea crisis

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Published: 23 Feb 2024, 12:15 AM IST
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