Global Trade Disruptions Expected to Raise Retail Costs in 2024

Summary

  • Shipping industry giant Maersk predicts possible extensive disruptions due to ongoing global issues such as wars and droughts affecting major routes like the Panama Canal.
  • These disruptions can result in increased delays and higher costs for major retailers including Walmart, IKEA, and Amazon as well as food manufacturers like Nestle and supermarkets including Lidl.
  • Unforeseen events of 2024 might further impact important trade routes, impacting the freight and commodities industry.
  • Despite diversions and increased costs, the inflation shock is predicted by Goldman Sachs to be less severe than the pandemic chaos of 2020-22.

Shipping Industry Predicts Extensive Disruptions

Giants like Maersk predict that the shipping sector, responsible for 90% of global trade, might face considerable disruptions due to ongoing international issues. Critical paths like the Panama Canal might be severely affected by droughts. Mega container ships, fuel tankers, and commodity carriers are expected to face scheduling issues throughout the year.

Mounting Troubles for Retailers and Food Manufacturers

Such disruptions would result in increased delays and mounting costs for big merchants like Walmart, IKEA, Amazon and food giants like Nestle and Lidl. This turbulence seems to be the new normal with unpredictable events continually disturbing the industry, says Jay Foreman, CEO at Florida-headquartered Basic Fun.

Moving Targets of Trade and Geopolitical Unrest

2024 poses risks like a potential expansion of Red Sea incursions towards the Arabian Gulf, impacting oil shipments and worsening China-Taiwan relations, affecting crucial trade lanes. Peter Sand, Chief Analyst at freight data provider Xeneta, remarks these potential situations. Moreover, Russia’s ongoing Ukraine conflict continues to distort the grain trade.

Shipping Giants Shifting Tack, High Inflation Expected

Freight giants like Maersk are now avoiding the Red Sea and its dangers, opting for alternate routes. The sudden diversion and increased fuel costs are predicted to drive up consumer prices. However, Goldman Sachs proposes that the inflation shock might not be as devastating as the turmoil caused by the 2020-22 pandemic.

Unprecedented Weather Conditions and Dry Bulk Shipping Costs

The Panama Canal, an alternative to the Suez Canal, faced a 33% reduction in crossings due to lower water levels. John Kartsonas, Managing Partner at Breakwave Advisors, notes that these extreme situations, if repeated frequently, are no more ‘one-off’ events but a recurring reality.

The profound effect these unexpected geopolitical events and environmental changes could affect not only the freight and commodities industry but also potentially trigger turbulent scenarios in Forex and trading, impacting various global assets in unexpected ways.

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