Red Sea Shipping Crisis Sparks Global Inflation Concerns

Beijing, January 3, 2024 — China News Service

Major international shipping companies, representing the top five globally, have announced a suspension of operations in the Red Sea-Suez Canal route. The crisis, triggered by attacks on commercial vessels by Houthi rebels in Yemen, has thrown the global shipping industry into unrest, intensifying concerns about worldwide inflation.

The Red Sea route is a critical channel for global trade, handling goods valued at over $1 trillion annually, accounting for approximately 12% of global trade. The frequent attacks by Houthi rebels have prompted international shipping giants to suspend operations, causing significant disruptions to global supply chains.

The suspension has led to increased shipping costs, a surge in maritime insurance expenses, and additional financial burdens for shipping companies. The Red Sea tension has become a catalyst for a renewed surge in global shipping prices, with China to Europe route rates rising for four consecutive weeks.

The Red Sea suspension has also triggered a surge in A-share shipping stocks, with companies like China COSCO Shipping, Ningbo Marine, and Sea Holding Development witnessing substantial gains. The Red Sea tension is seen as a trigger for a potential surge in shipping prices, although vigilance is required as the situation unfolds.

Given its strategic location as a key transit hub between Asia and Eurmoilope, the Red Sea accounts for about 14% of global shipping trade, handling the transportation of crucial commodities such as crude oil, refined products, electronics, and toys.

While the Red Sea suspension has disrupted global supply chains, its impact on the transportation of high-value-added products appears limited. However, for energy resources and certain bulk cargo, delays and cost increases in transportation are anticipated.

**Conclusion:** The Red Sea suspension has presented a new challenge to the global shipping industry, with repercussions on international supply chains. As the situation develops, the operational landscape for shipping companies and global trade will likely face further disruptions.