2024-01-21 19:52:00
BarcelonaYou have to be aware of what is happening in the Red Sea, but it is not an emergency situation for Catalan companies, which in general are not suffering from major supply problems or exaggerated increases in transport costs, unlike what happened in international trade during the covid-19 pandemic.
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The Red Sea is the gateway to the Suez Canal, and now the most important shipping companies in the world have decided to stop sailing through this area as a result of the Houthis’ attacks. About a third of the world’s maritime trade passes through this route and it especially links the trade of China and all of Asia with Europe, especially the Mediterranean. To give you an idea, 47% of the full export containers (2022 data) that leave the port of Barcelona go to Asia. In the case of imports, the impact is greater: 75% of the full containers that arrive at Barcelona’s infrastructure come from Asia.
Ticket prices are already beginning to reflect the impact of this crisis. According to the Aecoc distribution board, the price per container has gone from around 1,000 euros to 3,000 in just one month. But despite being a significant rise, it is far from the more than 15,000 euros when the pandemic threw world trade out of control and the supply chain was strained to the max.
Carles Mas, director of economics and business at the Pimec employer, assures that the situation “is alert, but without concern”. Despite everything, he recognizes that the impact goes through neighborhoods. It affects some sectors more, such as the automotive industry or companies that are supplied with materials or parts from China. “It doesn’t affect everyone,” says Mas, who remembers that 100,000 million euros of trade goods between Asia and Spain pass through the Suez Canal every year.
But Mas makes it clear that this crisis is not the main concern of Catalan companies, there are others that take precedence, such as the wars in Ukraine and Gaza, financial risks and rising interest rates, or the trade war between Europe and the United States. “Other European countries, such as Germany, suffer more because they depend more on trade with China,” says Carles Mas.
Enric Ticó, president of Feteia, the employers’ association of freight forwarders, logistics and customs, has a similar opinion. Ticó assures that at the moment the crisis is affecting “very slightly” the supply chain and prices. The president of the freight forwarders remembers that the route around Africa through the Cape of Good Hope can extend the journey by about 10 days and, in addition, involves more fuel consumption by the ships. But it indicates that it must also be taken into account that in the Suez Canal there are ships that have to queue for up to three days to be able to cross it and, in addition, they have to pay the toll to pass through, d approximately one million euros, which are now being saved.
Ticó indicates that going around Africa particularly affects the trade of Asia with the easternmost Mediterranean, but, for example, not so much with the important ports of northern Europe, since the journey is only extended by about 3,000 nautical miles.
Carles Mas and Enric Ticó agree in advising entrepreneurs to be proactive in their orders. “We recommend reviewing the inventory strategy and diversifying suppliers,” says the head of Pimec. Enric Ticó points out that current technology, for example with artificial intelligence, allows companies to react much faster to a situation of this type to adjust orders, stocks and supplies.
Another piece of advice given by the experts has to do with the need to adjust supplies for another impact that trade will suffer in the coming days: the Chinese New Year, next February 10. It is necessary to anticipate the orders, because during those dates China reduces its activity to a minimum. In addition, demand is increasing for the Asian giant. Factors that, according to the employers’ association Aecoc, could “promote an increase in the price of tickets”.
The lesson of covid
A factor that can help the fact that prices do not skyrocket to the maximum due to transport is the general slowdown of the economy, especially of consumption, brought about by the rise of interest rates to fight against inflation, which in principle has to bring down international trade. According to Carles Mas, the current increase in the price of transport “can be absorbed by the manufacturers” by reducing their margins, although he indicates that if the crisis “extends a long time, it will have an impact on the final price.
However, it indicates that the impact may be much less than what was suffered during the covid crisis. And also, he says, as a result of that crisis, “suppliers diversified” and, therefore, companies now have more alternatives. Enric Ticó also believes that the lesson has been learned. “We learned from covid”, points out the president of the freight forwarders. However, he also admits that if the crisis lasts too long, it could lead to an increase in final prices, because shipping companies will raise prices.
Therefore, the key is in the duration of the crisis, and this is what the CEO of Maerks, one of the world’s leading shipping companies, recognized this week from Davos. Vincent Clerc warned that problems arising from the Red Sea crisis will cause disruptions in the supply chain “for at least a few months”.
“For us, this will mean longer transit times and probably disruptions in the supply chain for at least a few months,” noted the executive, who said that while he is confident it could be a shorter time, it could also be longer because it is very unpredictable how this situation is actually developing.
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