Global trade shudders over blockages in the Suez and Panama canals

{"text":[[{"start":null,"text":"

"}],[{"start":13.32,"text":"Supply chain wobbles are back. "},{"start":15.624,"text":"Just as the effects of pandemic-era backlogs and port closures have unwound, two continental shipping passages, the Suez and Panama canals, are suffering from obstructions to trade traffic. "},{"start":26.167,"text":"Unlike the past few festive seasons, there is less concern about any delays spoiling Christmas. "},{"start":31.409,"text":"Most toy and food stocks have already been built up ahead of the latest blockages. "},{"start":35.714,"text":"The problems have however introduced a new risk for the global economy in 2024. "}],[{"start":41.480000000000004,"text":"Around 12 per cent of global trade passes through the Red Sea, which is bookended by the Suez Canal to the north and the Bab-el-Mandeb strait — known as the Gate of Tears — to the south. "},{"start":51.34700000000001,"text":"Since mid-November more than 10 transiting vessels have been attacked by Yemen’s Iran-aligned Houthi militants. "},{"start":56.952000000000005,"text":"Many shipping companies have responded by postponing journeys through the region — a crucial passage between Asia and Europe. "},{"start":63.369,"text":"Oil company BP announced on Monday that it had paused shipments through the strait, citing a “deteriorating security situation”. "}],[{"start":70.94,"text":"Since the region is an important freight channel for oil, liquefied natural gas and consumer goods, resulting shortages and bottlenecks could push up inflation. "},{"start":79.569,"text":"Transport costs are rising too. "},{"start":81.774,"text":"Insurance premiums for some ships traversing the region are increasing. "},{"start":85.592,"text":"Maersk also announced it would reroute ships around the Cape of Good Hope. "},{"start":89.334,"text":"If more followed, global trading costs would push higher. "},{"start":92.714,"text":"The route around Africa adds an additional 3,200 miles and nine extra days of travel on a typical journey between Asia and Europe, notes Clarksons, a shipping services provider. "},{"start":102.919,"text":"Oil and gas prices have not risen significantly so far. "}],[{"start":107.36,"text":"Problems in the Suez also risk combining with shocks elsewhere. "},{"start":111.214,"text":"Across the world, the Panama Canal is suffering from low water levels linked to drought. "},{"start":116.007,"text":"The channel between the Pacific and Atlantic Ocean is operating at only 55 per cent of its normal capacity, according to Capital Economics. "},{"start":123.374,"text":"Transits have been restricted for the coming months, and prices have gone up. "},{"start":127.342,"text":"The canal normally carries 5 per cent of seaborne trade, particularly US fuels and grains bound for Asia. "}],[{"start":133.96,"text":"The knock-on implications for global inflation depend on how long both blockages persist, and whether other shocks pile on top. "},{"start":141.102,"text":"The New York Fed’s indicator of supply chain pressures has perked up, albeit from a low point. "},{"start":146.282,"text":"The aggregate impact is also unclear. "},{"start":148.662,"text":"For instance, European gas prices have actually fallen recently on the prospect that Asia-bound American LNG via the Panama Canal may be redirected to Europe. "}],[{"start":null,"text":""}],[{"start":158.56,"text":"To contain the economic fallout, it is essential to get naval protection to the Red Sea quickly. "},{"start":164.02700000000002,"text":"A US-led international coalition to provide security for freight is gaining momentum. "},{"start":168.744,"text":"Meanwhile water levels in the Panama Canal have improved slightly. "},{"start":172.424,"text":"But neither development should make businesses or policymakers complacent that the issues are resolved. "}],[{"start":177.96,"text":"Some companies have already diversified their supply routes following the pandemic. "},{"start":182.56400000000002,"text":"This shock underscores the need for options. "},{"start":185.132,"text":"But the Suez and Panama Canal routes have few viable alternatives. "},{"start":188.97400000000002,"text":"They accounted for over half of the container shipping by volume scheduled between Asia and North America in the third quarter, according to estimates from trade analysis group MDS Transmodal. "},{"start":198.467,"text":"This means authorities must invest in the resilience of key trading chokepoints, both in terms of their security and climate adaptability, and by improving port efficiency and alternative transport routes. "}],[{"start":209.79000000000002,"text":"The pandemic and war in Ukraine may have been one-off events. "},{"start":213.30700000000002,"text":"But the shocks to the Panama and Suez canals are a reminder that with climate change and growing geopolitical risk, supply chain instability is here to stay. "}],[{"start":221.52,"text":""}]],"url":"https://creatives.ftacademy.cn/album/135305-1703121581.mp3"}