How does the Suez Canal Blockage affect India?

Suez Canal is a strategically located channel which is being used for trade from the West to the East. The items part of this trade are a mixture of raw materials and finished goods.

Recently, it has been in the news owing to the blockage of the canal by container ship – ‘Evergreen’

India being the third largest consumer of crude oil in the world is dependant on it for fulfilling its energy needs. Despite efforts being put in to stem the import of crude oil. It still imports around 78-80% of the crude oil through the Suez Canal.

Also, it exports finished products like crude oil, naphtha to developed economies.

Now coming to an important point what industries might be affected by the unseen blockage. Here, I have tried to list a few areas

The stocks which are most vulnerable are the ones using the Suez Canal for fulfillment in terms of raw materials – crude oil, coffee beans, etc.

There are a host of stocks dependent on them

  1. OMC (HPCL, BPCL, IOC)
  2. Paint Companies (Asian Paints, Berger Paints, etc.)
  3. Lubricant Players (Castrol, Gulf Oil, etc.)
  4. Fertilizer Manufacturers (RCF, GSFC, GNFC, etc.)
  5. Steel & Cement Manufacturers (SAIL, Tata Steel, Ultra Tech Cement, etc.)

Hopefully, the governments of different countries are trying their best to resolve this issue with US Navy bringing in their experts to unclog the canal at the earliest.

At present, the pending traffic is being asked to circumvent Africa via the Cape of Good Hope prior to reaching their destination.

The 1967-75 Suez Canal closure: Lessons for trade | VOX, CEPR Policy Portal

Other than this, India since the voluntary OPEC cuts has been looking to diversify its sources. The recent being India importing light sweet crude from Guyana via HPCL-Mittal Energy JV.

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References:

https://www.livemint.com/news/india/india-devises-plan-to-deal-with-suez-canal-blockage-11616776352828.html

https://www.livemint.com/industry/energy/hpclmittal-energy-first-indian-company-to-buy-guyanese-crude-liza-11616636738376.html

https://www.indiatoday.in/world/story/suez-canal-blocked-200-ships-stuck-number-may-go-up-to-350-india-works-out-4-point-plan-1784244-2021-03-27

https://www.ndtv.com/world-news/suez-canal-blockage-could-cost-6-to-10-billion-in-lost-trade-study-2399848

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