Red Sea Trade Route Disruption Lowers EU, US Exports: IfW Kiel Report

Summary

  • The daily transport of containers via the Red Sea has significantly decreased to about 200,000 from 500,000 in November, as reported by the IfW Kiel institute.
  • Shipping diversions due to attacks have caused delays of up to 20 days between Asian manufacturing hubs and European customers, according to Julian Hinz, director at IfW Kiel’s trade policy research centre.
  • These delays are visible in the declining trade statistics for Germany and the EU, as goods are still at sea and not unloaded as scheduled.
  • Shipping companies, including Maersk and Hapag-Lloyd, are rerouting their vessels around South Africa’s Cape of Good Hope – resulting in longer, more expensive voyages.
  • Houthi militants in Yemen, supported by Iran, have escalated attacks on vessels in the Gulf region to stand in solidarity with Hamas fighting Israel in Gaza.
  • Trade figures for December show a decrease in exports from and imports to the European Union by 2% and 3.1% respectively. U.S. trade reduced as well, albeit less significant due to the lesser reliance on the Red Sea trade route.
  • China’s trade counters the trend with a growth in exports by 1.3% and an increase in imports by 3.1%, possibly due to the forthcoming Chinese New Year, as indicated by the IfW Kiel institute.

Insights on the Decline in Red Sea Shipping

The Red Sea sees a sharp drop in the number of containers shipped daily, now estimated at 200,000 down from approximately 500,000 in November, as stated by the IfW Kiel institute.

Shipping Diversions Result in Delays

Julian Hinz, the director of the IfW Kiel’s trade policy research centre, highlighted that diversions due to the escalated attacks caused up to 20-day delay in journeys between Asian and European markets.

Impact on Trade Figures

Hinz also pointed out, “This delay reflects on the falling trade statistics for Germany and the EU as goods still remain at sea and are not unloaded at the ports as per the original schedule.”

Long, Expensive Voyages Becomes a Norm

Leading shipping companies such as Maersk and Hapag-Lloyd now resort to longer and costlier routes around South Africa’s Cape of Good Hope.

Houthi Attacks: A Show of Solidarity

Recent months have seen a rise in attacks on vessels in the Gulf region by Houthi militants in Yemen, who are backed by Iran, in a show of support for Hamas’ conflict against Israel in Gaza.

Fluctuating Trade Figures

According to the IfW Kiel’s trade indicator for December, both exports from and imports to the European Union declined by 2% and 3.1%, respectively. The U.S. also experienced a fall in trade, however, the effect was less pronounced due to the Red Sea trade route’s lesser significance for the country.

China’s Trade Resilience

The December figures, however, showed an increase in China’s trade, with a rise in exports by 1.3% and imports by 3.1%. The IfW Kiel institute suggested that this might be due to the anticipated Chinese New Year.

These uncertainties underline the volatile nature of the financial markets and could create potential trading opportunities or pose challenges for traders, especially those dealing with shipping-related assets.

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