‘Shipping volume via Suez Canal is around half as compared to last year,’ says Gaurav Ganguly of Moodys Analytics on the impact of Red Sea Attacks. Tells Shereen Bhan global supply chains will face difficulties but won’t be affected as much for now & shipping will continue.
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W Asia contined to escalate even as talks for a ceasefire continue reports suggest that Israel Hamas conflict which has now entered 110th day may see an agreement on a 30-day ceasefire in Gaza being reached soon but experts point out that there is still a lot of ground to
Cover as far as fighting in the Gaza Strip continues now the Red Sea continues to be on Red Alert the US military has carried out two more strikes in Yemen claiming to have destroyed two houti anti-ip missiles aimed at the Red Sea the pressure on the key Maritime route has deepened there
Were also tit fortat a attacks by Iran and Pakistan on each other’s soil causing worry of a widening regional conflict so where does this leave the state of energy Security in the situation also how badly is the supply chain being impacted joining us now to take us through that is gorov ganguli
Senior director of economic research at Moody’s Analytics gorov many thanks for joining us here on cnbv 18 uh uh you know take us through the key pressure points at this point uh on the back of the attacks that we are seeing and the impact on Supply chain disruption uh and
How large that is already thank you for having me on the show sharen so I guess the first point to make is that the Red Sea um is is seeing a reduced volume of traffic flowing through it as a result of the attacks around the Gulf of Aiden and the
Bubble manb street but the sez Canal is not closed for business and this is quite important um the volume of shipping that goes through the sez Canal has however declined so compared to a year ago the volume of shipping that is currently transiting the seers is roughly half has roughly halfed and the
Remainder of the traffic and this is primarily traffic from Asia to Europe and back that’s having to go via a longer Route Around the southern tip of Africa and depending on whether it’s we’re talking about a bult carrier or a container ship the bulk carriers have
Have a lower speed have a slower Speed The Journey the additional Journey time can be between eight and 18 days so clearly this is adding some friction to the global economy at a time the global economy um requires less of that sort of stuff now how much is that actually
Affecting Supply chains and the global economy through things such as impacted industrial production or inflation well the answer for now is not that much and that’s good news um we’ve heard of disruptions in automotive production in Europe we’ve heard of high high-profile cases such as Tesla and Volvo calling
For boses in production we’ve heard of retailers talking about shortages um but we haven’t what we’re not seeing right now is a massive increase in costs and a and a breakdown in Supply chains we’re just seeing some stretching of these Supply chains so the overall story for now is that industrial production at
Least in Europe is likely to take a little bit of a hit in in in the next few months um same thing would happen in parts of Asia Supply chains will face difficulties but shipping will continue and we’ll have to try and normalize so that means things like longer shipping
Times um companies having to think about the inventory situation having to deal with higher costs Etc but overall we think that this kind of a situation as long as it remains contained will not have a huge impact on the global economy uh yeah g you know you’re right
In pointing out that the impact so far has been limited but worth is to continue for the next few months and we don’t have any indication of hostilities baiting at this point in time uh you know are you factoring in for instance If This Were to go on for the next 6
Months or through 2024 specifically as far as inflation is concerned because on some uh routs we have seen a doubling in fact of freight costs so uh you know the impact at least on inflation on costs uh what could that potentially mean it’s it’s it’s a good point that if the
Longer this continues the more likely we will we are to see a significant impact on on on prices for instance um we’re right now assuming that a lot of this um sorts itself out by the end of the first quarter or perhaps sometime in the second quarter um but if it continues
Over a period of one year for instance then we are looking at a slightly different scenario but that said we should remember we should take in mind that that that shipping costs account for a pretty small fraction of total Goods costs so provided shipping costs don’t continue to escalate and get to
The point that we saw perhaps back in 2021 during the pandemic which was a very special case provided we don’t get to that kind of a situation it will still have a very small impact on inflation if I give you the example of Europe European inflation is coming down
In the Euro Zone which was very heavily impacted by the Russian invasion of Ukraine the fact that price growth is slowing and inflation is coming down reflects the normalization that’s occurred over the course of 2023 now inflation should get close to Target by the end of this year if we see this
Current situation persist for for the next six months and and if if prices Freight prices remain where they are that’s still not going to have a material impact on European inflation well that is good news and that’s good to hear and uh Our Hope certainly is that this is going to be
Ained and will not result in a protracted series of events in the Red Sea gorov ganguli always a pleasure many thanks for joining us here on CNBC TV8 that’s Moody’s Analytics with the impact of the attacks currently on in the Red Sea on global trade and shipping
Specifically that is it on this edition of business 360 do stay tuned a lot more coming up right after the short break we’re back in a moment