International Economics: IB Economics

This article highlights the impact of ongoing supply chain disruption in the Middle East, which has driven up the cost of shipping and has seen firms order their Christmas stock ahead of time.

And even having taken this course of action, it seems as though the price of some consumer durables with low profit margins is likely to rise in the months ahead. 

A quick look at the implications of the Red Sea crisis for the global economy, with the implications of disruption to global supply chains, rising shipping costs and the attendant shortages of certain commodities and thus costs, and the implications of this for inflation.

Shipping costs look set to rise again with the Suez Canal Authority raising its transit fee by 6%. Ultimately, this is going to increase costs of production, and will help fuel global inflationary pressure. 

This is an genuinely interesting clip looking at the fragile nature of the global supply chain, and why shortages came about in the wake of the pandemic. Shortages, causing shortages, causing shortages - largely as a result of bottlenecks in the shipping industry, and changing patterns of demand. 

The current big trade story is the blocking of the Suez canal, and the implications of this for international trade - and potentially inflation. This BBC clip highlights the opportunity cost of this - and it's staggering.

For those ships yet to set sail, re-routing via the Cape of Good Hope will mean an extra week to 10 days on the China-Europe voyage. For those ships already stuck in the Red Sea, it simply seems to be adding delays, and costs to their voyage.

The ongoing trouble in the Red Sea has meant longer journey times and increased shipping costs; this Observer article looks at the implications of this for global inflation noting that, as yet, retailers have yet to pass on the majority of these costs. 

Proof of supply chain issues, or price gouging. 

Alas, given rising costs across the globe, not least in shipping costs, I suspect the former not the latter. 

It doesn't look like there's going to be a speedy solution to the disruption in the global supply chains, with a coronavirus outbreak in Guangdong Province seeing ports there closed for three weeks. 

Factor in the Suez Canal crisis, and we've had a graphic illustration of the extent to which globalisation is a central facet of our economic system, and how fragile it is. Expect delays, shortages, rising shipping costs and, potentially, inflation.

And now a global view of the implications of the blockage of the Suez Canal - with a nice fact: 12% of global shipping uses the shipping lane. 

Or put another way - one in every eight ships -  and you can see the extent of the current blockage on marine vessel tracking sights such as Vesselfinder.com

An interesting insight into the importance of the Suez Canal to shipping and, by definition, global supply chains, as the Ever Given has run aground. The blockage of this key waterway is likely to see a spike in both oil and shipping prices, and might just make you think about the fragile nature of global supply chains.