Global trade conditions further deteriorated into the second half of 2024 as the Red Sea crisis continued to affect exports, a new report by S&P Global has found.
International trade has slowed down in July because manufacturers have struggled with shipping delays caused by the Red Sea conflict between Yemeni rebels and Israeli forces, the report noted.
This has forced freight companies to avoid the faster Suez Canal trajectory and instead take longer and costlier routes around the Cape of Good Hope in Africa – extending delivery times by up to two weeks.
Delivery times in July have risen at their quickest rate since January, S&P data showed, which in turn led to falling goods exports in many instances.
S&P Global’s Global PMI New Export Orders Index’s latest reading signalled that trade conditions deteriorated for a second successive month in July. This downturn was led by the EU and Canada, both with “marked reductions in export orders in the manufacturing sector”.
The UK too has seen a slump in exports this summer, with 24% of British companies doing business overseas saying they exported less this June than in the same month last year, while just 16% reported an increase, according to recent ONS data.
”The impact of these shipping delays has varied so far during 2024, but has picked up markedly in July, and is now running in at nearly four times the long run average”, said S&P Global chief business economist Chris Williamson.
“While this is still well below the peak impact seen during the pandemic, it represents an impact on supplier delivery times of the likes not seen by the PMI surveys in the 15 years of data available prior to the pandemic.”
The world’s second-largest shipping firm, Maersk, has warned that traders’ attempts to mitigate the impact of the Red Sea conflict on Christmas deliveries is putting even more pressure on global supply chains.
CEO Vincent Clerc said last week that buyers were ordering Christmas stock early in efforts to avoid major disruption during the peak holiday period as they feared an uptick in Houthi rebel attacks on western cargo ships.
There are also fears that Israel’s war in Gaza could escalate into a regional conflict, which would further affect shipments.
However, a rush of early orders may exacerbate the already existing delays, Clerc warned.
Another major supply chain challenge affecting delivery times in 2024 include low water levels in the Panama Canal, which have restricted vessel volumes.
“While weakness in underlying demand conditions partially dampened export orders, it was also the rise in shipping constraints that played a part, which we will be monitoring in the coming months,” added Jingyi Pan, economics associate director at S&P Global Market Intelligence.
Higher shipping rates were also feeding through to higher manufacturing production costs to a degree not seen since February, the trade insight provider noted.
Overall, global exports trade has been on a downward trajectory since March 2022 barring slight improvements in April and May this year, S&P’s report showed.
The data also found that India remained the world’s fastest-growing exporter in July for the 17th consecutive month, with the Asian nation’s export orders growing at their second-fastest rate in 13 years.
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