INTERNATIONAL MARITIME : Middle East Crisis - Many continents face supply disruptions

The Red Sea shipping crisis has disrupted global trade and supply chains, particularly affecting routes through the Suez Canal.

A report by the Global Trade Research Initiative (GTRI) dated March 26 said the Red Sea crisis is expected to have a significant negative impact on trade volumes in 2024, shipping costs and insurance. Rising risks and delayed shipments will continue to disrupt global value chains, reducing profits and making exports of many low-margin products unviable.

Countries in Asia, Africa and Europe will face the most disruption across industries. Beginning in earnest on October 19, 2023, the Red Sea crisis is now in its fifth month.

Trade disruption due to the Red Sea crisis

The Red Sea shipping crisis has disrupted global trade and supply chains, particularly affecting routes through the Suez Canal, which handles about 30% of global container trade.

GTRI said that with ships now sailing around Africa's Cape of Good Hope, transit times have increased by 30% and global container shipping capacity has also decreased by about 9%. This detour delays shipments from Asian manufacturers to European consumers by up to 20 days.

Additionally, container shipping rates also spiked by $500 in the last week of December 2023, with companies like Hapag-Lloyd significantly increasing rates for shipments from the Indian subcontinent to Northern Europe. Maersk is also diverting all container ships from Red Sea routes, warning customers to prepare for significant disruption.

According to data shared by the IMF, trade volume passing through the Suez Canal decreased by 50% year-on-year in the first two months of the year, and trade volume passing through the Cape of Good Hope skyrocketed, increasing by an estimated 74%. compared to last year's level.

By mid-February 2024, about 621 container ships had changed their regular routes to avoid the crisis zone. Now, this necessary rerouting is causing congestion at key ports such as Cape Town, Ngqura, Richards Bay and Durban in South Africa, leading to delays in loading and unloading goods, GTRI said. could exacerbate supply chain challenges and potentially lead to shortages.

Trade disruption in Europe and Africa

Due to the Red Sea crisis, countries around the world, including those in Europe, Asia and the Americas, are also seeing price increases in a variety of products, from food to electronics. , ultimately contributing to inflation and impacting consumer spending.

European countries, which rely heavily on the Suez Canal for imports from Asia, are grappling with higher shipping costs and potential delays in receiving goods, affecting many industries from food to manufactured goods. Nordic countries such as Germany, the Netherlands, the UK, Belgium and France are particularly vulnerable to these delays and cost increases.

Africa and the Middle East (including Egypt, Sudan, Yemen): These regions are particularly vulnerable due to their dependence on imports of grains such as wheat, corn and rice via the Red Sea. Countries such as Egypt, Sudan and Yemen, already facing food insecurity, could get worse if grain shipments are delayed or become more expensive. Russia's crude oil exports to India transiting the Suez Canal are affected by the need for longer shipping routes, affecting supply dynamics, costs and reduced trade volumes.

With such a dramatic impact, the crisis shows that geopolitical conflicts can quickly destabilize global shipping routes, leading to rising shipping costs and significant delays across many sectors. and area.

The crisis also highlighted the importance of exploring alternative land and sea trade routes. This includes the potential for investment in the Northern Sea Route and expansion of road transport infrastructure, GTRI said. The India-Middle East-Europe Economic Corridor (IMEC) becomes important in this context.