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Red Sea Ship Attacks Not Driving Inflation, Moody's Says

By Reuters
Red Sea Ship Attacks Not Driving Inflation, Moody's Says

Attacks on merchant ships in the Red Sea have increased shipping costs but have not impacted inflation, Moody’s Investor Services have said.

The attacks have caused delayed cargo in everything from furniture to apparel, food and fuel.

Ships are being diverted away from the Suez Canal trade shortcut to the much longer route around Africa.

The re-routing takes vessels and crew out of danger from missile and drone attacks by Iran-aligned Houthis.

Container ships are the main vessels that pass through the Europe-Asia Suez Canal route.


Not Driven By Demand

Most container ships are avoiding the Red Sea. The crisis has become the biggest disruption to global trade since the Covid-19 pandemic.

However, the diversions are not expected to have a significant impact on inflation. That is according to the credit rating and risk analysis firm Moody’s.

David Harlid, a transport sector analyst at Moody’s said this is due to shipments not being driven by demand.

Rerouting ships around Africa requires about 6-10% more vessels, as longer sail times slow the return of ships to suppliers.

This sends on-demand spot rates on some routes up more than 100%.


The increases came off rock-bottom levels and shipping experts expect them to normalise.

The reason for this is that owners were struggling to fill existing vessels with cargo before the attacks started in November.

Automotive Industry

According to maritime data firm Clarksons Research, the container shipping industry’s total capacity will increase by 7-8% in 2023 and 2024.

Apparently bearing the brunt of the upheaval is the automotive industry.

Tesla, along with other manufacturers, has temporarily paused European production due to a shortage of components.


While grocery retailers in the UK have expressed concern about tea shortages, there has not been a repeat in stock issues experienced during the pandemic.

Read More: Diageo Says Red Sea Disruption Delaying Some Spirits Shipments

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