What's happening in Mediterranean & Africa

 

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Global shipping joins an uncertain world that tries to cope with a half dozen volatile, dangerous emergencies

While the Baltic and International Maritime Council's (BIMCO) predictions of world shipping's future were undramatic, they were at least a reasonable summary of what many think are most likely outcomes to emerge from present circumstances.

While consumer demand in the developed world is expected to increase, a simultaneous yet inconsistent boom in shipbuilding would be puzzling if it were not for Yemen's Houthi forces firing missiles at ships in the Red Sea and in Gulf of Aden. This has caused 90 per cent reduction in the use of the Suez Canal, necessitating the use of the longer Cape route that requires the circumnavigation of Africa to get to Europe. This creates a shortage of shipping space. Hence, and thus, a shipping boom.

BIMCO also points to the termination of the labour contract of the International Longshoremen's Association September 30, which might well shut down the US east and Gulf Coast ports, which have done well since the 2016 expansion of the Panama Canal that allowed the passage of ships of 13,000 TEU rather than 4,500 TEU to transit the waterway. This broke the stranglehold the US west coast had on North American-bound Asian cargo that no longer had to endure long, costly overland journeys to the consumer rich regions east of the Mississippi.

While this year's rainy season has not been restored to normal, water levels on the waterway are rising, and transits are increasing, mitigating draft restrictions to a great extent.

As east and Gulf coast port shutdowns and Panamanian water level difficulties will undoubtedly please US west coast interests, the shipowners of BIMCO raised concerns about harbour congestion building worldwide, but in particular, the known choke points like San Pedro Bay ports - LA and Long Beach.

But this ignores the falling use of other ports north and south of LA-Long Beach. Despite losses in diverted cargo to east coast ports from the Far East, and their record-breaking tonnage figures, these gains were made at the expense of Oakland, Seattle, Tacoma and Portland that have had a hard time for years.

Looking further north to Vancouver and Prince Rupert in Canada, or south to Mexican ports of Manzanillo, Lazaro Cardenas and Guaymas, one finds much capacity and efficient intermodal onward passage.

Another big worry is the escalation of trade disputes between the EU and the US on one side and China on the other, says the BIMCO paper. "If inflation and interest rates in US and EU do not come down as expected, it is likely that consumers and businesses will suffer, resulting in lower volumes. On the other hand, 2024 could end stronger than we forecast if the 3rd quarter peak remains strong," it said.

On top of these concerns comes the rising war risk both apprehended, and as a lethal reality. The ongoing Russo-Ukrainian War is in stalemate with the Russian inching forward at great cost to secure a little more territory to be traded away later in order to keep what they have in the eastern Russian-speaking regions - or so it appears. While this conflict is biggest and most lethal in the world today, it has the least impact on international shipping.

Other active fronts are in Israel and the Red Sea and the Gulf of Aden. Fearing that peace would soon break out in the Middle East, because of the spreading popularity of the Abraham Accords, Hamas, the de facto government of the Gaza strip; Hezbollah, the de facto government of southern Lebanon, and the Palestinian Authority that governs much of the West Bank. Together, they feared peace because it would destroy their  grievance that justifies their existence as a fighting force.

Thus, Hamas staged a murderous raid on a Israeli music festival, killing 1,200 and taking 200 hostages. Israel counter attacked, bent of destroying Hamas, Gaza's popularly elected government, whose October 7, was also supported by West Bank Palestinians. The Houthis, described as "rebels", but who have occupied Yemen's capital Sanaa for a decade, appear wield the power of the state, and have managed to deny safe passage of 90 per cent of shipping that transits the Red Sea and the Suez Canal.

The least militarily active of global the crisis zones, is the slow-burning fuse of smouldering China that started to do so in 2013 with the ascension of Xi Jinping, who has gathered more power to himself and made himself president for life. For the longest time China was able to parade about on the international stage as the coming great power to challenge the United States - all the while pleading poverty as a third world nation immune to demands for reciprocal trade terms and an end to special treatment the developed world accords the less developed nations.

Allowing this state of affairs to persist were the best and the brightest of the West, the public sector adhering to an equalizing ideology by which the poor should be come richer and richer become poorer. The deep state's private sector component found that such equalization policies of the public sector dovetailed with their own desires to reduce labour costs by employing cheap foreign labour.

All this went well until US President Donald Trump insisted that a greater measure of reciprocity should apply to external relations. This was also applied to proportional NATO expenditure. Such sentiments were embraced in the upper reaches of the private sector, where having access to the China markets was enormously popular and had been since the 18th century.

But China did not give ground on reciprocity. Adding to its growing unpopularity was herding Muslims by the millions into de-programming re-education camps, fomenting physical conflict on the Sino-Indian borders, water cannonading Philippines Coast Guard cutters as they re-supplied military outposts in their internationally recognised Exclusive Economic Zone. All this became an issue because the Philippine presence violated, China's unilaterally declared "Nine Dash Line" that encompasses most of the South China Sea, a claim that the international Hague court declared invalid. At the same time, there are constant threats to invade Taiwan, a de facto independent state, which China claims is a breakaway province.

Within the more peaceful realm of parliamentary bickering, there has been movement, but as yet no revolution. It appears that the West is divided electorally left and right on a 50:50 basis. Recent results have reflected the shifting sands, and they have shifted substantially to the right, but not enough to unseat the powerful denizens of the deep state. In any event, this state of affairs should make the next push easier.

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Unless the world blows up as some experts say is more likely than ever, it seems that international shipping should have a good year ahead. Do you agree?

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Mediterranean & Africa
Trade Specialists