Global Trade Heavily Disrupted by Red Sea Attacks—IMF

March 8, 2024
global trade

By Adedapo Adesanya

The International Monetary (IMF) has said in the first two months of 2024, Suez Canal trade dropped by 50 per cent from a year earlier while trade through the Panama Canal fell by 32 per cent, disrupting supply chains and distorting key macroeconomic indicators.

These two channels, which are critical to global trade have been held back by disruptions.

Attacks on vessels in the Red Sea area reduced traffic through the Suez Canal, the shortest maritime route between Asia and Europe, through which about 15 per cent of global maritime trade volume normally passes.

Conversely, a significant drought at the Panama Canal has forced authorities to enforce limitations that have substantially curtailed daily crossings since October of last year. This has resulted in a further deceleration of maritime commerce through an additional critical chokepoint, which typically facilitates approximately 5 per cent of worldwide maritime trade.

Following these disruptions, several shipping companies diverted their ships around the Cape of Good Hope. This increased delivery times by 10 days or more on average, hurting companies with limited inventories.

The IMF also said in its blog post that the volume of trade that passed through the Suez Canal dropped by 50 per cent year-over-year in the first two months of the year, and the volume of trade transiting around the Cape of Good Hope surged by an estimated 74 per cent above last year’s level. Meanwhile, the transit trade volume through the Panama Canal fell by almost 32 per cent compared with the prior year.

Through its PortWatch platform, launched in November 2023, in January and February 2024, there was a 6.7 per cent decline year-over-year in port calls to the 70 ports we track in sub-Saharan Africa. The corresponding declines for the European Union and the Middle East and Central Asia were 5.3 per cent.

The Bretton Wood institution said the decreases likely reflect the transitory effects of longer shipping times.

It warned that if this continues, it would temporarily hamper some supply chains in affected countries and cause upward inflation pressure (in part due to higher shipping costs).

The IMF also said that these shipping disruptions may affect official statistics on recorded imports (and exports).

“For example, merchandise trade reports for January in many countries in Africa, the Middle East, and Europe may show slowing import growth as some imports that would normally have been recorded in January were only delivered in February. For the same reason, many low-income countries that obtain a significant share of their fiscal revenues from import duties (and export taxes) may report lower fiscal revenue than expected for January,” it referenced.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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