2024-01-13 20:31:15
The Economist newspaper said in a recent report that concerns are growing about the possibility of inflation returning to rise due to operational disruptions in the Suez and Panama Canals.
The newspaper pointed out that under normal circumstances, the Suez and Panama Canals carry approximately 10% and 5% of global maritime trade, respectively. However, the Panama Canal Authority recently imposed restrictions on the number of ships allowed to transit, due to low water levels. In addition, escalating tensions in the Bab el-Mandeb Strait, a vital passage from the Indian Ocean to the Suez Canal, have forced some ships traveling between Europe and Asia to take the longer route around Africa.
This coincided with the United States launching new strikes today, Saturday, on targets of the Ansar Allah group (Houthis), 24 hours after joint raids with Britain targeted several sites in Yemen.
These strikes came in response to the Houthi group launching attacks on Israeli or Israel-linked ships in the Red Sea in the wake of Israel’s war on Gaza, which caused damage to the Israeli economy, increased shipping prices, and suspended flights by international shipping companies.
The newspaper referred to these disruptions as actual bottlenecks in the global supply chain, likening them to a plug placed on these vital trade routes.
High shipping prices and their relationship to inflation
The newspaper stressed that this turmoil is particularly worrying for policy makers at a time when rich countries appear to be overcoming inflation.
She noted that the rise in shipping prices from mid-2020 to early 2022 coincided with the initial rise in this wave of inflation, and their subsequent decline coincided with its decline.
However, since the Houthi attacks on Israeli or Israel-linked ships began last November following the Israeli aggression on Gaza, shipping rates have once again witnessed a significant jump.
Citing data from the leading international shipping price index, Freitos Baltic, the cost of shipping a standard container rose by 93% last week, January 9.
Drury Consulting also indicates a 114% increase in the cost of shipping from Shanghai to Rotterdam during a similar period, which is the route that usually passes through the Suez Canal.
American and British warplanes and warships launched air strikes on sites belonging to the Houthi group in Yemen (Archyde.com)
Despite these increases, the report indicates that inflation is unlikely to be repeated as it was in the era of the Corona epidemic, because the current shipping disruptions are not on the same scale as they were before, as the mentioned reading on the index is a quarter of the peak reached in 2022.
In September 2021, participants in a survey of purchasing managers’ opinions conducted by Standard & Poor’s Global Ratings responded that shipping costs contribute to raising prices 17 times more than the long-term average, according to the newspaper.
In the latest survey of the same institution, purchasing managers responded that this possibility is only 3 times more likely than the long-term average.
Standard & Poor’s Chris Rogers notes that future surveys may indicate more concern, as annual freight contracts are typically agreed in March, and current rates may not accurately reflect the true cost of transport.
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