Changing waterways raises costs; the Red Sea crisis may push up global inflation
In recent days, as the situation in the Red Sea has continued to escalate, global shipping has been severely affected.
Some logistics industry experts said that the Red Sea crisis is likely to last for several months, which will further disrupt the cargo transportation order in the region and push up shipping prices, which will have a profound impact on the global logistics industry.
Some economists have warned that the escalation of the Red Sea crisis may once again push up global inflation and even lead to further weakening of economic growth.
The impact of the Red Sea crisis on the shipping industry may last throughout the year
As the only way through the Suez Canal, the Red Sea plays an important role in global shipping routes.
The Suez Canal Authority issued a press release on January 12 stating that navigation through the Suez Canal is still operating normally.
However, global freight forwarding company “Melanweidian” said in a report released on the same day that although smaller ships are still passing through the canal, all major container shipping companies are rerouting around the Red Sea and will no longer pass through the Suez Canal.
Denmark’s Maersk Line, Germany’s Hapag-Lloyd, MSC Cruises and many other shipping companies have stated that starting from January 1 this year, additional fees will be added to a large number of affected routes.
Some analysts pointed out that as ships enter war zones, relevant insurance may become invalid, so more and more companies are choosing to reroute. And those policies that are still in effect are quite expensive.
Ryan Peterson, CEO of the international freight forwarding company “Feixiebo,” said that the ship’s diversion was due to both economic and safety considerations: “The shipping company’s decision must first consider the safety of the crew. If there is A bunch of people are firing missiles at you and I’m sure you’re going to make the same decision.”
The Dutch International Group (ING) website recently published an article stating that goods from Asia are generally shipped to the European continent through the Red Sea-Suez Canal route. The trade volume of this route accounts for about 12% of global trade, and the Red Sea crisis has led to Expenses increased significantly.
The article stated that if the cargo ship changes its route to go around the Cape of Good Hope, although it can save the cost of passing through the Suez Canal, the voyage from Asia to Europe will increase by about 6,000 kilometers. At a speed of 14 knots, this means that the voyage will be extended by 10 days or even two weeks, thus significantly increasing the cost.
According to ING statistics, about 80% of container ships on the Red Sea-Suez Canal route were forced to change routes in the three weeks after mid-December last year, a level reached in the first week of January this year. 90%. Based on this projection, the extent of global container shipping capacity depletion may increase by 20%-25%.
The article warns that the risks of Red Sea shipping cannot be solved quickly and the impact on the shipping industry will last throughout 2024.
“The increased costs will ultimately be passed on to consumers.”
The Red Sea crisis not only affects shipping companies, but also has serious spillover effects.
In the first week of January this year, on the Asia-Europe route, which is the world‘s largest trade route and one of the routes most severely affected by the Red Sea crisis, the freight rate for container cargo reached three times that of early December last year.
France’s CMA CGM Group recently announced that as of January 15, the company’s container freight rates from Asia to the Mediterranean region have been increased by up to 100% compared to the levels on January 1.
Statistics show that about 30% of global consumer goods trade is transported through the Suez Canal. The increase in container freight will inevitably lead to a certain increase in the price of all goods in the container.
The website of the internationally renowned journal “Logistics Industry Management” recently published an article stating that the Red Sea crisis has caused global shipping prices to soar, and has led to delivery delays and disruptions to the global supply chain.
Zvi Schreiber, CEO of a global freight booking and payment platform, pointed out that in the new year, the price of shipping containers has risen to more than 4,000 US dollars. And if shipping costs remain at such a high level, “it will eventually be passed on to consumers.”
The global freight forwarding company “Melan Weidian” recently released an analysis report stating that the Red Sea crisis has had an impact on the international shipping supply chain, resulting in a significant increase in air cargo volume.
Apart from this, rail transport is also an alternative.
A few days ago, Deutsche Bahn Schenker, the freight forwarding subsidiary of Deutsche Bahn, said that the company has arranged additional transportation capacity to cope with the growth of rail freight business.
However, some experts have analyzed that the cost of shipping and land transportation is several times higher than that of sea transportation and is not a long-term solution.
Some economists have warned that if the Red Sea conflict protracts and tensions in the Middle East escalate, it may disrupt energy supply, trigger global inflation again, and have a devastating impact on the global economy.
The Red Sea-Suez Canal route is an important waterway for the transportation of oil and its derivatives from the Persian Gulf to Europe and the United States, accounting for about a quarter of global oil transportation.
Takasaki Balzi, a logistics expert at the University of Bradford in the UK, said that if more energy companies follow BP’s lead and stop using the Suez Canal, crude oil spot prices will face upward pressure.
Economists at Capital Economics believe that while the current shipping disruptions themselves are unlikely to derail the downward trend in global inflation, potential military conflict could push up energy prices.
A research report released by Oxford Economics in the UK in January this year also believed that there are upward risks to global prices.
The report said that if container shipping costs remain at current levels, it could increase global inflation by about 0.6 percentage points.
The World Bank said in a recent report: “In the event of an escalation in the Red Sea conflict, energy supplies could be seriously disrupted, leading to a surge in energy prices that would have significant spillover effects on other commodity prices and exacerbate geopolitical and economic tensions. Uncertainty, in turn, could dampen investment and lead to further weakness in economic growth.”
Source of material丨Global Information Broadcasting “Global Deep Observation”
Planning | Zhang Zhe
Written by Li Hao
Editor丨Lin Wei Yao Yanxia
Signing and Review丨Yuan Ding Zhangzhe
Producer丨Guan Juanjuan