- Suez Canal disruptions impact trade
- Increased costs, delays for consumers
- Global routes affected, rates fluctuate
The lengthier, alternative routes vessels have been compelled to use have resulted in delays and increased costs, which will ultimately be passed on to consumers through higher prices; the environmental impact is also significant.
Since Yemeni Houthi rebels attacked cargo ships in the Red Sea, Suez Canal cargo has dropped by nearly half.
Producers in the Asia-Pacific region are connected to Western markets via the critical shipping channel. Longer, alternate routes have resulted in cost increases and delays.
As a reaction to the assaults carried out by the militant group supported by Iran, which asserts its support for Palestinians in Gaza, airstrikes have been initiated by the United States and Britain.
UNCTAD (United Nations Conference on Commerce and Development), an organization that assists developing nations in international commerce, reported that the number of ships using the canal decreased by 39% in the past two months, resulting in a 45% decline in freight tonnage.
Jan Hoffmann, the head of trade logistics for the agency, stated that three crucial global trade routes were currently disrupted as a result of Russia’s invasion of Ukraine and the Panama Canal, where drought-induced low water levels reduced shipping by 36% annually and 62% annually in the previous month.
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Concerns Amid Suez Canal Disruptions
“We are extremely concerned,” he stated. Delays, increased expenses, and increased greenhouse gas emissions are being observed.
According to him, pollution increased due to ships taking lengthier routes and accelerating to make up for detours.
12–15% of global trade and 25–30% of container traffic pass through the Suez Canal.
In the week ending January 19th, canal container shipments were 82% lower than in early December.
Weekly spot container rates increased by $500 (£392), impacting cargoes from Asia to Europe and those bypassing Suez en route to the west coast of the United States.
Despite this, rates remained roughly half what they were at the height of the COVID-19 pandemic.
Mr. Hoffmann stated that food prices could be affected, adding that approximately half of the price increases since the Ukraine conflict were attributable to higher transportation costs. However, it may take some time for consumers in developed nations to notice a difference.
He said it can take a year to pass on higher freight charges to customers. This applies regardless of whether the retailer is Walmart, Ikea, or another similar establishment.
