The maritime crisis in the Red Sea is no longer so much (or not only) a problem of supplies, but of prices and costs, which can soar and, ultimately, affect inflation and delay the lowering of interest rates interest already planned by central banks. These are some of the consequences of the military attack by the United States and the United Kingdom in Yemen this morning, with the aim of hitting the Houthi rebels who have been blocking shipping traffic through the canal for a month with terrorist acts of Suez.
Maritime rates, which have tripled in the last month, are beginning to create problems for shippers. “The shipping companies act like an oligopoly and have turned a local problem into a global issue. They apply a surcharge of 2,000 dollars per container on any route, when it comes to extending the navigation by only ten days”, explains Jordi Espin, general secretary of Transpime (Spanish Association of Shipping Companies). “Often, when they arrive in Europe, they leave the goods in distribution centers like Tangier or Gibraltar instead of port cities like Genoa, Valencia or Barcelona. In these circumstances, for companies, it is now impossible to plan routes and logistics, because, in addition, punctuality, which was almost 80%, has dropped by 59%”, he adds.
According to Alan Murphy, CEO of consultancy Sea-Intelligence, “these disruptions have nothing to do with those that took place during the pandemic, but the current outlook for capacity is filled with a high degree of uncertainty and carriers could face a capacity crunch for Asian exports in the coming weeks.”
According to their calculations, the shipping companies, due to the fact of reorienting the navigation plans, can reduce the load capacity by up to 40% in the week of January 22. About 350 ships have changed their route and almost eight out of ten ships that transited the area now prefer to pass through the Cape of Good Hope.
The International Monetary Fund (IMF), which has tools that monitor maritime traffic in real time (PortWatch), has detected, for example, that traffic in the Suez Canal “decreased by 28% year-on-year in the ten days before 2 January and also shows “that the shipment volumes passing through the head of Bona Esperança increased by 67%”. The most affected sectors are petroleum products, chemicals and non-metallic minerals.
“They increase both the times and costs of transmission for exporters and importers, and this could renew the upward pressure on prices”, explained in a press conference the spokeswoman of the Fund, Julie Kozack. The Red Sea, he recalled, represents 10% of world trade flows.
In the markets, oil was up close to 2% yesterday. 20% of the world’s crude oil consumption passes through these waters. “If a large part of the flows through the Strait of Hormuz were to stop, it would represent up to three times the impact of the oil price crisis of the 1970s [which rose 300%],” he said in Reuters Saul Kavonic, energy analyst at MST Marquee.
But can inflation (2.9% in the Eurozone and 3.4% in the United States, still far from the 2% target) pick up again as a result of the Yemen crisis? It is not clear. Rubén Segura-Cayuela, an economist at Bank of America, stated in a recent note that, unlike the pandemic, with demand now weaker in the Eurozone and a restrictive policy, “it is more likely that business margins will absorb a part significant transport costs than a couple of years ago”.
Another study prepared by Oxford Economics recalled that the IMF already said at the time that inflation can rise by 0.7% every time the fares double in price. However, compared to the covid era, these analysts believe that trade will stagnate in the first part of the year, there will not be, as then, a spike in demand, and inventories are more robust, already that only 20% of companies declare that they have supply problems (in 2020 the percentage was 70%).
Among those who do have a lack of materials, the Volvo car manufacturer, which announced yesterday that it will interrupt production at the Belgian plant in Ghent for three days next week due to the delay in the arrival of components across the Red Sea . Tesla will do the same, but for two weeks, at the factory in Germany. Earlier, Michelin had to stop due to a lack of rubber.
