GLOBAL MACRO
The UN Security Council meets today to discuss the situation in Yemen. Previously, the focus had been on the ongoing civil war but now there is also the problem of rebel Houthi attacks on shipping and now on Israel. A solution seems remote though and in the meantime, shipping costs continue to rise and are no longer disinflationary. It is an issue central banks continue to monitor closely, although they are still well below 2021 highs.
- Since the Iran-backed Houthis targeted vessels in November last year, global container rates are up 335% and the China to the Mediterranean route is up over 400% as ships take the longer route around southern Africa and insurance and crew costs also rise. The Suez Canal reported traffic down 22% in 2023/2024 financial year.
- FBX global container rates rose sharply at the start of July but eased last week falling 2.9% w/w, but the month average is still up 18.5% m/m to date, likely to be the third straight rise leaving it up 291% y/y after 215% in June. Bulk carrier rates have been more muted with the Baltic Freight Index up 1.6% m/m and 87.8% y/y in July.
Global shipping rates y/y%
Source: MNI - Market News/Refinitiv
- FBX container rates for the China to the east coast of North America rose strongly over the last three months and even though they fell last week are set to post their third consecutive double-digit rise in July bringing them up to 282% y/y from 225% last month. US headline inflation eased 0.5pp over Q2 to 3% in June but rising shipping costs are an area to watch.
- Rates from China to the Mediterranean fell 1.3% last week but are still 7.5% m/m higher this month and up 276% y/y (June 209% y/y). Despite restrictive monetary policy headline euro area inflation has stabilised around 2.5% since February.
Euro area CPI vs China to Mediterranean container rate y/y%
Source: MNI - Market News/Refinitiv
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