Indian companies are taking rapid steps to take advantage of the ceasefire in the Iran war. Under this, companies are resuming exports and factories in this area are resuming work at full capacity. Due to the hope of rebuilding in war-affected countries, companies are also preparing to increase orders. Pharma companies have said that export demand will increase as countries are looking to replenish their stocks of medicines. At the same time, companies making packaged food have said that the supply is now returning to normal. Distributors are also ready to bear higher expenses on freight transportation to avoid shortage.
Companies manufacturing electrical goods like air conditioners, refrigerators, wires and cables are also preparing for more orders. The Middle East, an important export market for Indian consumer goods companies, saw a 40-50% decline in business last month due to the war. Havells India Chief Executive Anil Rai Gupta said India can capture a larger share of the demand for remanufacturing in the Middle East because it has strong ties with the region and is also geographically close. The company earns about 40% of its export earnings from this sector and is seeing a lot of opportunities in the cable and wires sector.
How much will the volume increase?
AWL Agri Business, India’s largest consumer goods manufacturer, will resume shipping goods to Dubai’s Jebel Ali port, bringing the supply chain back to normal across the region. In the ET report, the company’s Executive Vice President Angshu Malik said that the distributors are ready to bear more expenses to maintain the supply of essential goods. He further said that we hope that the volume of goods will increase again to 4,000-5,000 tonnes per month. During the war, the company was shipping goods via Oman.
The two-week ceasefire announced on Wednesday has stopped the war, but tension in the region still remains high. For this reason, big shipping companies are still in a state of waiting before sending their ships through the important waterway ‘Strait of Hormuz’. Companies which have local plants in this region, like Parle Products and Dabur India, are also now starting to operate at their full capacity. Parle Products Vice President Mayank Shah said that their plant located in Bahrain, which was working at 70-80% capacity last month, will now start working at its full capacity. At the same time, AC manufacturing company Blue Star is also preparing to meet the increased demand related to remodelling.
SMEs are benefiting
All exporters, including SMEs, have started working again with their trading partners after the reopening of shipping routes. The reopening of the strait is expected to ease logistics and freight and insurance costs, which had previously increased by 40-50%, are now coming down. Ajay Sahay, Director General of Federation of Indian Export Organizations, said that the ceasefire and the reopening of the Strait of Hormuz has provided much-needed relief to exporters. This will help in removing logistics bottlenecks, reducing freight rates and keeping insurance costs under control. He further said that although this may improve trade in the near future, it is necessary to exercise caution considering that this ceasefire is temporary.
Drury’s World Container Index (WCI) rose 21.59% to $2,309 per 40-foot container on Thursday, following continued increases in sea freight rates. On February 26 it was at $1,899. Compared to last week, this index has increased slightly from the level of $2,287 on April 2. Sahay said that some buyers have expressed their readiness to take delivery of the goods and have asked to proceed with the process of sending the goods. He also said that if the ceasefire period is extended, it may also create new demands.
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