European Union foreign ministers met in Brussels on the 19th to formally launch a Red Sea escort operation.

The action plan lasts for one year and can be renewed, CCTV News reported. According to the report, it will still take several weeks from the official launch to the implementation of specific escort missions. Belgium, Italy, Germany, France and other countries plan to send warships to the Red Sea region.
The Red Sea crisis is still unfolding. According to the latest statistics from Clarkson Research, the capacity of ships entering the Gulf of Aden region in terms of gross tons from February 5 to 11 has fallen by 71% compared with the first half of December last year, and the decline is the same as the previous week.
The statistics show that container ship traffic remained very limited during the week (down 89 per cent from the level in the first half of December). Although freight rates have fallen back in recent weeks, they are still two to three times higher than they were before the Red Sea crisis. Container ship rentals continued to rise modestly over the same period and are now 26 per cent above their level in the first half of December, according to Clarkson Research.
Michael Saunders, senior economic adviser at Oxford Economics, said that since mid-November 2023, global sea freight rates have increased by about 200%, with sea freight from Asia to Europe rising by about 300%. “There are some early signs of this impact in business surveys in Europe, with some disruption to production schedules, longer delivery times and higher input prices for manufacturers. We expect these costs, if sustained, to add substantially to some measures of inflation over the next year or so.” “He said.

The biggest impact will be on trade such as refined oil products

On February 8, the German Navy frigate Hessen left its home port of Wilhelmshaven for the Mediterranean Sea. Photo: Agence France-Presse
CCTV News reported that the German frigate Hessen set sail for the Mediterranean Sea on February 8. Belgium plans to send a frigate to the Mediterranean on March 27. According to the plan, the EU fleet will be able to open fire to defend commercial vessels or defend themselves, but will not actively attack Houthi positions in Yemen.
As the “front station” of the Suez Canal, the Red Sea is a very important shipping route. According to Clarkson Research, about 10% of seaborne trade passes through the Red Sea each year, of which containers passing through the Red Sea account for about 20% of global seaborne container trade.
The Red Sea crisis will not be resolved in the short term, affecting global trade. On a breakdown, according to Clarkson Research, tanker traffic fell 51% compared with the first half of December last year, while bulk carrier traffic fell 51% in the same period.
The statistics show that the recent tanker market trends are complex, among them, the Middle East to Europe route freight rates are still much higher than in early December last year. For example, the bulk freight rate of LR2 product carriers is more than $7 million, which is down from $9 million at the end of January, but still higher than the level of $3.5 million in the first half of December.
At the same time, no liquefied natural gas (LNG) carriers have passed through the area since mid-January, and the volume of liquefied petroleum gas (LPG) carriers has dropped by 90%. Although the Red Sea crisis has a very significant impact on liquefied gas carrier transportation, it has a limited impact on liquefied gas transportation market freight and ship rentals, while other factors (including seasonal factors, etc.) have a more significant impact on the market during the same period, and gas carrier freight and rentals have declined significantly.
Clarkson research data shows that ship capacity through the Cape of Good Hope last week was 60% higher than the first half of December 2023 (in the second half of January 2024, ship capacity through the Cape of Good Hope was 62% higher than the first half of December last year), and a total of about 580 container ships are now sailing around.
Freight costs for consumer goods have risen sharply
Clarkson research statistics show that freight costs for consumer goods have increased significantly, but they are still not as high as during the pandemic.
The reason for this is that, for most goods, sea freight costs account for a smaller proportion of the price of the consumer goods themselves. For example, the cost of shipping a pair of shoes from Asia to Europe was about $0.19 in November last year, increased to $0.76 in mid-January 2024, and fell back to $0.66 in mid-February. By comparison, at the peak of the epidemic in early 2022, costs could top out at more than $1.90.
According to an assessment given by Oxford Economics, the average retail value of a container is about $300,000, and the cost of shipping a container from Asia to Europe has risen by about $4,000 since the beginning of December 2023, suggesting that the average price of goods inside the container would rise by 1.3% if the full cost were passed on.
In the UK, for example, 24 per cent of imports come from Asia and imports account for about 30 per cent of the consumer price index, meaning that the direct increase in inflation will be less than 0.2 per cent.
Mr Saunders said the adverse shocks to supply chains caused by sharp price rises in food, energy and globally traded goods were diminishing. However, the Red Sea crisis and the associated sharp rise in shipping costs are creating a new supply shock that, if sustained, could add fresh upward pressure to inflation later this year.
Over the past three years, inflation rates have risen sharply in many countries for a number of reasons, and inflation volatility has increased significantly. “Recently, these adverse shocks have begun to abate and inflation has fallen rapidly. But the Red Sea crisis has the potential to create a new supply shock.” “He said.
He predicted that if inflation were more volatile and expectations more responsive to actual price movements, central banks would be more likely to have to tighten monetary policy in response to an increase in inflation, even if it was caused by a temporary shock, in order to re-stabilize expectations.
Sources: First Financial, Sina Finance, Zhejiang Trade Promotion, Network