Internationalization of war conflict in the Middle East And in Red Sea can mean one Threat to economic growth prospects Although experts are sure of this, Europe’s Expected cost increases are not fully reflected to consumers. The worst-case scenario that analysts thought for the Gaza war is coming true blockade of the suez canal In 2024, with the pandemic, it has a less dramatic impact than in 2019. The blockade of the trade route between Asia and Europe passing through the Red Sea, as a result of it turning into a war zone, means the extension of goods transportation via the Cape of Good Hope. Cargoes on this route are delayed between 10 and 20 days, and the costs of shipping companies increase by approximately 25% due to this route.
Goods traffic in the Bab al-Mandeb passage in the Red Sea is today 46% lower than on 19 November, when Yemeni militias began attacks on ships, and 53% less than recorded on 7 January of the previous year. According to Port Watch data. Maersk shipping company had confirmed on January 5 that its ships had been diverted due to the high risk situation: “We have decided that all Maersk ships transiting via the Red Sea and the Gulf of Aden will be diverted south to the North Sea towards the Cape of Good Hope”. Maersk’s decision comes before or after other major companies in the shipping industry.
Even if the shipping blockade becomes a reality, David Rees, senior emerging markets economist at Schroders, tends to somewhat downplay the economic impact of disruptions to supply chains. The most serious impact will be the increase in transportation costs. However, although the supply halt due to the pandemic in 2019 meant a rapid rise in interest rates and an almost total economic halt, this time the effects of the Suez blockade will be different, according to Schröders (British multinational asset management). According to Rees, “Detours through South Africa will extend delivery times, but goods will still reach their destination, which means: A complete deficiency is unlikely. By contrast, recent trade data from China, which shows export growth in volume rather than value, suggests that companies are being forced to cut prices to eliminate excess capacity, at least in some sectors. ”
Rubén Segura-Cayuela, Bank of America’s chief European economist, partly agrees with this analysis, understanding that the most serious economic effects of the blockade were the increase in costs and its impact on inflation; but he acknowledges that quantifying impacts “is important.” It is difficult and the outcome is not that obvious.
Demand in the euro zone is now weak, according to Segura-Cayuela margins are more likely to cover a significant portion of these cost increases. “Weakening global demand (also in China), signs of ongoing inventory depletion (delaying shipments may work for some companies, given current demand dynamics), and developments in oil prices upside down on transportation costs, oil and gas could help reduce costs. ” The impact of rising freight costs on consumer price inflation,” concludes this Bank of America expert.
In the case of Maersk, for example, the previously announced Transit Interruption Surcharge (TDS), Peak Season Surcharge (PSS) and Emergency Contingency Surcharge (ECS) are being applied to all cargo on ships affected by disruptions in the Red Sea and Gulf. Aden’s. Will this increase in costs mean an increase in final prices? This is very likely, but experts think the impact on consumers will be relatively moderate.