One of the world’s top trading routes, the Suez Canal, is essentially closed for business to many shipping companies. That’s because Houthi rebels in Yemen have been attacking ships in response to Israel’s war in Gaza. It’s a major route for oil and gas shipments so prices edged up this week. John Yang discusses the implications for international commerce with Ryan Petersen of Flexport.
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>> One of the world’s top trading routes, the Suez canal, is essentially closed for business to many shipping companies. That is because hoopty militia — Thi militia have been attacking ships. >> The world’s biggest shipping companies are detouring thousands of miles and going around the cape of good hope at
The southern tip of Africa. That is adding full kelce — fuel costs and time. Some tanker groups said they were suspending use of that route. >> It is around the cape of good hope. That adds 20% to a journey. It is not just the time alone that matters.
The price will go way up. It will have an impact on the east coast. A lot of trade goes through the Suez canal. Supply chain’s have faced a lot. How big a deal is this to the supply chain and have resulted are they? >> It is a pretty big deal.
We have really resilient systems. Almost miraculous infrastructure supports the global economy. But something just like this is all it takes. A small group of rebels shooting some pretty impressive missiles and drones. It does not take a huge well-funded ward to disrupt this. We have been through a lot of those.
>> Was the potential impact? >> The thing to watch is that for the last year or so, we have really been in a deflationary environment. Prices have been coming down from the peaks we saw in the pandemic. People assume that inflation was on the way out. Ocean freight, if you listen to
Retailers they have been saying the ocean freight is cheap. There is excess capacity. It will not be the impact we had. We have seen the prices for ocean freight coming down. Versus a couple of months ago. >> The impact is already being felt. In a sense of how long it is
Before it really becomes a big problem? >> I think it is wait and see what happens. They were not able to stop this. It is an extension of the conflict in gaza. As was explicitly stated. It is not easy to see how there is a simple overnight solution.
>> The U.S. Is leading a multinational force that will patrol the red sea and tried to protect merchant ships. Will that give shipping companies and of confidence? >> I think it is difficult to say. It will be about crewmember safety. I’m sure you would make the same decision. To stay far away.
If you sail into a war zone with a ship, your insurance is probably Boyd. — Void. This is not an easy solution. Saudi Arabia has been at war almost a decade with Yemen. The rebels have said this is tied to the conflict in gaza. It is not something with an easy solution.
Not easy to see how this resolves very quickly. The Suez canal is incredibly valuable. >> Thank you very much. >> My pleasure. ♪♪