Red Sea disruptions currently still ‘mild and manageable’
There is no spike so far as per data up to January 2024, unlike the elevated figures witnessed in 2021-2022 in the wake of the lockdowns due to the pandemic and China’s zero Covid-19 policy
KUCHING: The impact of the Red Sea conflict on the trade and shipping industry has been viewed as currently still “mild and manageable” as data shows mild logistical disruption while the hike in shipping costs are still less severe than during the Covid-19 lockdown, analysts observed.
Of note, the Red Sea is an important shipping route that includes the Suez Canal linking the Red Sea with the Mediterranean Sea making the area an important lifeline for 11 per cent of global trade, 30 per cent of global container shipping volume, 12 per cent of global seaborne oil shipments and eight per cent of worldwide LNG trade.
According to the research team at Maybank Investment Bank Bhd (Maybank IB Research), its observations of other indicators on global trade, logistics and supply chain conditions suggest the overall global impact is so far “mild and manageable”.
It pointed out that global container freight volume showed no signs of being materially affected by the events in the Red Sea.
In fact, growth quickened in January 2024 to 4.6 per cent y-oy and 1.7 per cent m-o-m to 14.236 million TEUs (December 2023: 2.15 y-o-y and 0.6 per cent m-o-m to 13.99 million TEUs).
Maybank IB Research
It also highlighted that there has been no discernible delays in unloading container ships.
“There is no spike so far as per data up to January 2024, unlike the elevated figures witnessed in 2021-2022 in the wake of the lockdowns due to the pandemic and China’s zero Covid-19 policy,” it said.
It further noted that the suppliers delivery time component of the Global Purchasing Managers Index (PMI) dipped below 50 in January 2024 for the first time since January 2023.
“Its reading of 48.9 last month however signals a very mild logistical disruption thus far, in comparison to the severe dislocation caused by the pandemic and China’s protracted zero Covid-19 policy, as per the record low of 34.7 in October 2021 and 2021 to 2022 average of 39.8.
“In addition, the Jan 2024 print is above long-term historical average of 48.4 and median of 48.5 (excluding pandemic and China zero Covid-19 policy period of March 2020 to December 2022),” the research team said.
Maybank IB Research pointed out that the risk is the current spillover from the IsraelHamas war persists, and worst, conflagrate into ‘Middle East Instability’.
“Such escalation could be about a broader Israel-Arab tensions. However, we think this now looks unlikely in view of the apparent co-operation between some Arab states and Israel to ensure logistical and business continuity, thus supply chain security, in the wake of the Red Sea event; the Gulf-Israel corridor established by Saudi Arabia that functions as a ‘land bridge’ connecting the Arabian Peninsula and the Mediterranean since midDecember 2023.
“Goods docking in Persian Gulf ports such as Jebel Ali in the United Arab Emirates (UAE) or Mina Salman in Bahrain could transit via trucks to Israel’s Haifa Port. However, escalation risk remains that of a direct IsraelIran confrontation,” the research team opined.