Red Sea Attacks Disrupt Global Trade

IMF Blog, March 7, 2024

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In the first two months of 2024, attacks on vessels in the Red Sea area and a severe drought at the Panama Canal disrupted two critical shipping routes, reducing global trade flows and altering shipping patterns.
The Suez Canal is noted as the shortest maritime route between Asia and Europe and normally passes about 15 percent of global maritime trade volume.
The Panama Canal usually accounts for about 5 percent of global maritime trade.

Suez Canal trade volume: dropped by 50 percent year-over-year in the first two months of 2024.
Transit around the Cape of Good Hope: surged by an estimated 74 percent above last year’s level.
Panama Canal transit trade volume: fell by almost 32 percent compared with the prior year.
Diversions around the Cape of Good Hope increased delivery times by 10 days or more on average.
Port calls in January and February 2024 to the 70 ports tracked in sub-Saharan Africa declined by 6.7 percent year-over-year.
Corresponding year-over-year declines in port calls for the European Union and the Middle East and Central Asia were 5.3 percent.

Longer delivery times and route diversions have hurt companies with limited inventories.
If disruptions continue, ripple effects could temporarily hamper some supply chains in affected countries and cause upward pressure on inflation, in part due to higher shipping costs.
The re-routing of ships can distort key macroeconomic indicators and make it more difficult to gauge the underlying momentum of global trade and economic activity in the coming months.

Official statistics on recorded imports and exports based on customs records may be affected by the temporary impact of ships being re-routed, complicating interpretation of trade momentum.
Merchandise trade reports for January in many countries in Africa, the Middle East and Europe may show slowing import growth because imports that would normally have been recorded in January were only delivered in February.
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.

The analysis uses data from the PortWatch platform to show high-frequency transit estimates through the Suez Canal, the Panama Canal, and the Cape of Good Hope.

Parisa Kamali, Robin Koepke, Alessandra Sozzi, Jasper Verschuur — March 7, 2024