Global trade declined by 1.3% from November to December 2023 as militant attacks on merchant vessels in the Red Sea led to a plunge in the volumes of cargo transported in that key region, a German economic institute said on Thursday.
Currently around 200,000 containers are being transported via the Red Sea daily, down from some 500,000 per day in November, the IfW Kiel institute said.
Diversions in response to the attacks have led to journeys between Asian production centres and European consumers taking up to 20 days longer, said Julian Hinz, director of the IfW Kiel's trade policy research centre.
"This is also reflected in the declining trade figures for Germany and the EU, as transported goods are now still at sea and have not already been unloaded in the harbours as planned," Hinz said in a statement.
Shipping giants such as Maersk and Hapag-Lloyd have been sending their vessels on longer, more expensive journeys around South Africa's Cape of Good Hope.
Iranian-backed Houthi militants in Yemen have stepped up attacks on vessels in the Gulf region in recent months to show their support for Palestinian Islamist group Hamas fighting Israel in Gaza.
By region, the IfW Kiel's trade indicator for December showed exports from and imports to the European Union down by 2% and 3.1%, respectively. The United States saw a 1.5% drop in exports and a 1% drop in imports, although the Red Sea trade route is less crucial for that country.
China's trade bucked the trend, with exports up 1.3% and imports up 3.1%. The institute said this was likely down to the upcoming Chinese New Year.
Red Sea shipping turmoil leads to a drop in European goods trade
Europe's economy is starting to feel the first wave from the Red Sea shipping disruptions.The latest Kiel Trade Indicator released Thursday shows the European Union's imports dropped 3.1% in December from the previous month and exports were down 2%. In Germany, the world's No. 3 exporter, imports fell 1.8% and exports were off 1.9%.
The gauge revealed global trade fell 1.3% last month from November, capping a seesaw year for international commerce:Among the reasons for the softness: Containers hauled through the Red Sea — where ships are subjected almost daily to attacks by Houthi militants — plunged by more than half. Currently, about 200,000 containers are crossing the waterway each day, down from 500,000 in November, the Kiel report said.
In the UK, the grocery chain Sainsbury is working closely with the government to cope with shipping delays. It's also carefully planning the sequencing of products coming from the Asia-Pacific region to ensure they arrive in the right order.On Thursday, Tesco's CEO said the shipping delays could lead to inflation on some consumer goods.
An analysis released Thursday by Sea-Intelligence suggested the short-term pain might not be over, as European cargo owners wait an extra week for goods traveling from Asia to northern ports and possibly two weeks for those bound for the Mediterranean.
"Whilst this is certainly a serious problem for many shippers, we should keep in mind that these disruptions are no way near to the ones caused during the pandemic," Sea-Intelligence said. "However, the present data shows that the shippers could expect a capacity crunch for Asian exports in the coming weeks."Surging Freight Rates
Many importers face ocean freight rates that have doubled or tripled on a spot basis since the crisis began in mid-December. The Drewry World Container Index released Thursday showed spot rates for a 40-foot containers rising again.But those remain well below the record-high container costs set during the pandemic.
"Accordingly, despite a noticeable increase in transportation costs, no noticeable consequences for consumer prices in Europe are to be expected," Julian Hinz, director of the Trade Policy Research Centre and the new head of the Kiel Trade Indicator.He added, perhaps optimistically, that "apart from slightly longer delivery times for products from the Far East and increased freight costs, to which the container ship network should quickly adjust, no negative consequences for global trade are to be expected."
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