“The manufacturers who emerge stronger from this period will not be those who suffered least. They will be those who used the disruption to make decisions they had been deferring. The invisible shock has made the cost of deferral visible. That is, perhaps, the only constructive thing about it.” Ashish Sheth, Chairman & Managing Director, Sarjak Container Lines & Saksham Group of Companies
For two years, the industry told itself the Red Sea crisis was manageable. Reroute around Africa, absorb the freight cost, wait it out. Then Hormuz closed. Now the Red Sea is back under threat. The window that briefly opened for India-bound Suez services has shut again and Indian manufacturers are left facing something the global supply chain has never encountered before: both primary maritime corridors, closed simultaneously, with no resolution timeline in sight.
This is not a shipping story. It is a manufacturing story, and for India specifically, a gas story. Nearly 90 percent of India’s LPG and half its LNG transits the Strait of Hormuz. When that corridor closes, kilns go cold, urea plants cut output, and MSME clusters lose the fuel they run on. The disruption that most of the world is reading about as an oil price event is arriving on Indian factory floors as a production continuity crisis.
This is not a temporary disruption. It is a structural reset, and Indian manufacturers, logistics operators, and supply chain planners must respond with strategic intent, not reactive improvisation.
Energy Shock → Manufacturing Shock
This distinction is what makes the current situation a manufacturing story as much as an energy one. Gas-linked sectors — fertilizers, petrochemicals, ceramics, and glass — face immediate input constraints when LNG flows tighten, not just higher costs. That pressure cascades across value chains, raising input prices for plastics, packaging, and industrial intermediates, while LPG-linked household stress feeds into labour availability and wage dynamics in manufacturing clusters.
Unlike oil shocks of the past, which primarily inflated costs, the disruption in Hormuz-linked gas flows in 2026 is affecting production continuity, margin stability, and planning cycles simultaneously — forcing Indian manufacturers to operate in an environment where energy access and industrial output are both at risk at the same time.
How the Disruption Is Playing Out Across Indian Manufacturing
Fertilizers sit at the frontline. India has already been forced to cut production at three of its own urea plants following the drop in Qatari LNG output. Globally, urea prices have jumped from $475 per metric ton to $680 per metric ton and this disruption is arriving precisely at the start of the kharif planting season, the worst possible moment. The deeper impact unfolds downstream: higher fertiliser costs and supply uncertainty are influencing agricultural economics, softening rural demand, and creating a delayed but significant drag on sectors linked to rural consumption, FMCG and entry-level automotive among them. What begins as a supply-side shock is already setting in motion a broader consumption slowdown.
Petrochemicals represent one of the most critical transmission channels. With LPG and hydrocarbon feedstocks constrained through Hormuz, cost inflation is flowing through polymer production into plastics, paints, packaging, textiles, and industrial intermediates, raising the baseline cost structure of manufacturing across the board. Export competitiveness for Indian manufacturers in price-sensitive sectors is eroding in real time.
Steel is showing early stress concentrated among smaller and mid-sized units reliant on LPG and industrial gases for furnace operations. Some units are already reporting production slowdowns. Large integrated players remain relatively insulated, but the broader manufacturing ecosystem is under strain that will push input costs higher for downstream sectors including infrastructure and automotive.
MSMEs are the most vulnerable and are feeling the pressure first. Input price inflation across industrial materials was severe even in February, before the Strait formally closed. Brass prices rose 24.1 percent month-on-month, copper wire surged 20.7 percent, and aluminium powder increased 17.5 percent. The S&P Global Market Intelligence input price index reached a 15-month high of 54.7 in February. The March numbers will be worse. For MSMEs in pharmaceuticals, plastics, food processing, and light engineering — operating on thin working capital, this is not a cost management challenge. It is an existential question.
Ceramics, glass, and continuous-process textiles face a disproportionate impact because their production models offer no flexibility. A kiln or furnace that goes cold is not a pause — it is a loss event involving damaged inventory, restart costs, and broken export commitments. LPG shortages are already forcing some units to halt operations entirely.
Logistics and export manufacturing face an additional layer of pain beyond energy inputs. Spot freight rates on critical trade lanes have surged by as much as 70 percent. War-risk insurance premiums have been cancelled or repriced to commercially unworkable levels for Hormuz transits, and are now returning to the Red Sea corridor as well. At key Indian gateways such as Nhava Sheva, cargo accumulation is rising as sailing schedules become increasingly uncertain. The result is a logistics environment defined by three simultaneous pressures: costs rising, speed falling, and predictability rapidly eroding.
The Way Forward: What Manufacturers Must Do Now
The disruption has exposed a structural truth that Indian manufacturing can no longer defer: efficiency-optimized supply chains are not resilient supply chains. The recommendations below are not theoretical — they reflect what well-positioned manufacturers are already doing, and what the rest must do urgently.
Rebuild inventory strategy around strategic buffering, not lean cycles. Just-in-time was designed for a world of predictable transit times and stable corridors. That world does not exist today. Every critical input linked to gas, petrochemicals, or Gulf and Red Sea trade lanes must carry a minimum 60 to 90-day buffer. This will create short-term working capital pressure, but that cost is predictable and manageable. An unplanned production shutdown because a critical input did not arrive is neither. Prioritize buffers for inputs with the longest alternative sourcing lead time and the highest production impact if interrupted.
Diversify energy and feedstock sourcing immediately. The crisis has exposed the cost of concentration, geographic, supplier, and corridor concentration simultaneously. Fertilizer producers should be accelerating sourcing from Russia, Central Asia, and North Africa, markets that are not Hormuz-dependent. Petrochemical manufacturers should be evaluating substitute feedstocks and blended inputs. For ceramics and glass clusters, the immediate question is whether any alternative fuel source, even at higher cost, can sustain production continuity. The answer to that question needs to be found now, not during the next shortage.
Redesign logistics pathways and lock in capacity early. Rerouting cargo via the Cape of Good Hope is now a structural requirement, not a temporary workaround. Manufacturers and their logistics partners must pre-plan alternate corridors, evaluate multimodal options including land bridge solutions through Central Asia, and critically, secure vessel capacity and freight contracts ahead of demand spikes. In a constrained market, those who book early absorb the cost increase; those who book late face both higher costs and unavailability. The goal is to secure the most reliable routing available under current conditions and build production schedules around it, not to wait for the optimal route to reopen.
Renegotiate contracts and freight agreements before your next renewal cycle. If you are operating on freight or supply contracts written before 28 February, review the force majeure clauses, rate adjustment provisions, and delivery timeline commitments immediately. Contracts priced on Suez-route assumptions are mispriced for a Cape-route world. Engage buyers on freight cost escalation clauses now, most international buyers understand the current environment. A transparent conversation today is far less damaging than a disputed invoice after delivery. Similarly, factor freight and insurance volatility explicitly into your pricing strategy for the next two quarters.
Integrate supply chain planning directly with production decisions. One of the structural gaps this crisis has exposed is the disconnect between logistics and production planning in most Indian manufacturing organizations. When transit times are stable, this gap is manageable. When they are not, it becomes a source of cascading failure. Build scenario-based planning into your production cycle, best case, delayed case, and disruption case, and create cross-functional coordination between procurement, logistics, and operations that does not require a crisis to activate. In a volatile environment, planning adaptability matters more than planning accuracy.
Strengthen working capital buffers and engage policy mechanisms actively. As transit cycles lengthen and costs fluctuate, financial resilience becomes as important as operational resilience. Secure additional working capital lines now, before the stress is visible on the balance sheet, lenders respond better to proactive requests than to reactive ones. Simultaneously, government and port-led interventions, customs relaxations, port fee waivers, cargo prioritization mechanisms, are providing real relief, but only to those who actively engage with them. Track these mechanisms, coordinate with port authorities, and stay aligned with industry bodies. In a disruption environment, information asymmetry is itself a competitive disadvantage.
The Structural Shift: Stop Waiting for Normal
Let’s be direct about something the industry is reluctant to say out loud: normal is not coming back.
India’s government has done what governments do, released petroleum reserves, diversified crude sourcing toward Russia, the United States, and Africa, deployed naval assets to secure critical sea lanes. These are the right moves, and they are buying time. But they are crisis management tools, not structural solutions. Strategic reserves run out. Naval escorts cannot guarantee commercial shipping economics. And no diplomatic goodwill arrangement with Tehran changes the fundamental reality that India’s industrial gas supply hangs on a 34-kilometre-wide strait that any sufficiently motivated adversary can threaten on 48 hours’ notice.
Indian manufacturers who are waiting for this to resolve before making structural decisions are making a strategic error. The question is not when Hormuz reopens. The question is what your supply chain looks like the next time it closes, because there will be a next time, and the time after that.
Here is what practical resilience actually requires, stated plainly.
At the firm level, the manufacturers who will outperform their peers over the next five years are not those who are most efficient. They are those who are most recoverable. Efficiency and recoverability are different design objectives, and for the past two decades, Indian manufacturing has optimized almost exclusively for the former. That needs to change — and it needs to change in three specific places.
First, the energy supply chain. Any manufacturing operation that runs on LPG or LNG and has not yet mapped its exposure, identified alternate fuel sources, and established supply agreements with non-Gulf providers is carrying a risk it has not priced. Fix this before the next shortage, not during it. Second, the inventory model. Sixty to ninety days of buffer stock on critical inputs is not inefficiency — it is insurance, and it is cheaper than a production shutdown. The working capital cost of carrying buffer inventory is a fraction of the revenue cost of an unplanned halt. Third, the logistics contract. Every freight and supply contract your organization signs from this point forward needs explicit provisions for war-risk surcharges, alternate routing cost recovery, and transit time variance. Contracts written on the assumption of stable corridors are contracts that will be disputed the next time corridors are not stable.
The manufacturers who emerge stronger from this period will not be those who suffered least. They will be those who used the disruption to make decisions they had been deferring. The invisible shock has made the cost of deferral visible. That is, perhaps, the only constructive thing about it.
The era of building supply chains for a world of open corridors and predictable transit is over.
Build for the world as it is.
The invisible shock is no longer invisible. It is operational, financial, and strategic. The question is no longer whether disruptions will occur. It is whether your organization is structured to absorb them when they do.
The author is Ashish Sheth, Chairman & Managing Director of Sarjak Container Lines and Saksham Group of Companies.
