Tag Archives: Global Trade

Not Israel but Global Trade is under attack as Commercial shipping takes an additional 3,500 nautical mile journey to avoid Yemen rebels: How much is that Chinese toaster oven going to cost now?

Cargo-Ships-Containers

Important Takeaways:

  • Red Sea crisis: What it takes to reroute the world’s biggest cargo ships
  • Hundreds of cargo ships are being rerouted around the southern tip of Africa to avoid Houthi attacks in the Red Sea. But just how easy is it to divert the world’s biggest ships?
  • Since November, Yemen’s Houthi rebel group has targeted vessels passing through the strait of Bab al-Mandab, a 20 mile (32km) wide channel that splits north-east Africa from Yemen on the Arabian Peninsula. They claim to be targeting vessels with connections to Israel following the start of the war in the Gaza Strip.
  • They’ve used everything from heavily armed hijackers to missiles and drones. For seafarers caught up in the chaos, it must be terrifying. A tanker, for example, could carry around one million barrels of highly flammable oil.
  • An estimated 12% of global trade passes through the Red Sea every year, worth more than $1tn (£790bn). But many shipping firms have begun avoiding the area altogether. Hundreds of giant container ships, some of them more than 300m (984ft) long, are now choosing a lengthy detour around the continent of Africa instead of heading up the Red Sea and through the Suez Canal on voyages from Asia to Europe. But rerouting such large vessels is no easy task – the logistics involved can be enormous and time consuming.
  • Elsewhere, the severe drought afflicting the Panama Canal and the war in Ukraine – which has curtailed grain shipments via the Black Sea – are also strangling global supply chains. There is an urgency to adapt and reroute, though it comes with serious financial and environmental consequences.
  • Steering clear of the Red Sea and taking the lengthy detour around the Cape of Good Hope, however, adds around 3,500 nautical miles (6,500km) and 10-12 days sailing time to each trip. This requires extra fuel (an additional $1m/£790,000’s worth according to some estimates), possibly finding alternative ports of call, adjustments to delivery timetables, and rising costs. But many companies are making that choice rather than risk attack by missiles and hijackers.

Read the original article by clicking here.

G7 criticizes nations who undermine global trade in rallying cry for reform

By William James

LONDON (Reuters) -Trade ministers from the Group of Seven (G7) wealthy nations criticized countries who undermine the global trading system and called for democratic states to rally behind reforms of the international trade rulebook.

Following a virtual meeting, the G7 members said they were concerned about “increased use of non-market policies and practices” and took aim at those who use heavy subsidies, mask the state’s involvement in the economy, and steal technology.

“These distort competition and reduce fairness and trust in the system,” they said in a communique issued by Britain, which holds the rotating presidency of the G7 this year.

“Fundamentally, we note that they are a threat to the integrity and sustainability of the rules-based multilateral trading system.”

The communique did not refer to China directly, but members like Britain have accused Beijing of undermining the system by using all the policies mentioned.

China, a World Trade Organization member since 2001, has denied criticism that it steals intellectual property, unfairly hurts the environment or improperly trades goods made with forced labor.

In another indirect reference to China, the communique also called on countries which use World Trade Organization rules designed for developing economies to their advantage, and called for the rules to be changed to prevent that.

Britain and other WTO members have previously argued that China benefits from exceptions to the rules which were made decades ago and no longer reflect its status as an economic superpower.

“We call on advanced WTO Members claiming developing country status to undertake full commitments in ongoing and future WTO negotiations,” the communique said.

The group held “frank and constructive” discussions regarding reform of the WTO dispute resolution system – parts of which were paralyzed in recent years by former U.S. President Donald Trump’s administration.

They said those discussion would continue at a further meeting in October, and more broadly expressed support for WTO Director-General Ngozi Okonjo-Iweala’s efforts to reform the organization.

(Reporting by William James; Editing by Hugh Lawson, Toby Chopra and Nick Macfie)

Ship blocking Suez Canal like ‘beached whale’ could be stuck for weeks

By Yusri Mohamed, Gavin Maguire and Florence Tan

ISMAILIA, Egypt (Reuters) – A container ship blocking the Suez Canal like a “beached whale” may take weeks to free, the salvage company said, as officials stopped all ships entering the channel on Thursday in a new setback for global trade.

The 400 m (430 yard) Ever Given, almost as long as the Empire State Building is high, is blocking transit in both directions through one of the world’s busiest shipping channels for oil and grain and other trade linking Asia and Europe.

The Suez Canal Authority (SCA) said eight tugs were working to move the vessel, which got stuck diagonally across the single-lane southern stretch of the canal on Tuesday morning amid high winds and a dust storm.

“We can’t exclude it might take weeks, depending on the situation,” Peter Berdowski, CEO of Dutch company Boskalis which is trying to free the ship, told the Dutch television program “Nieuwsuur”.

A total of 156 large container ships, tankers carrying oil and gas, and bulk vessels hauling grain have backed up at either end of the canal, Egypt’s Leith Agencies said, creating one of the worst shipping jams seen for years.

Three ships were being escorted out of the canal, it added.

The blockage comes on top of the disruption to world trade already caused in the past year by COVID-19, with trade volumes hit by high rates of ship cancellations, shortages of containers and slower handling speeds at ports.

The SCA, which had allowed some vessels to enter the canal in the hope the blockage could be cleared, said it had temporarily suspended all traffic on Thursday. Shipping giant Maersk said in a customer advisory it had seven vessels affected.

Berdowski said the ship’s bow and stern had been lifted up against either side of the canal.

“It is like an enormous beached whale. It’s an enormous weight on the sand. We might have to work with a combination of reducing the weight by removing containers, oil and water from the ship, tug boats and dredging of sand.”

A new attempt to move it would take place later on Thursday, the ship’s technical manager, Bernhard Schulte Shipmanagement (BSM), said.

Roughly 30% of the world’s shipping container volume transits through the 193 km (120 miles) Suez Canal daily, and about 12% of total global trade of all goods.

Shipping experts say that if the blockage is not cleared in the coming days, some shipping may re-route around Africa, which would add roughly a week to the journey.

“Every port in Western Europe is going to feel this,” Leon Willems, a spokesman for Rotterdam Port, Europe’s largest, said. “We hope for both companies and consumers that it will be resolved soon. When these ships do arrive in Europe, there will inevitably be longer waiting times.”

Consultancy Wood Mackenzie said the biggest impact was on container shipping, but there were also a total of 16 laden crude and product oil tankers due to sail through the canal and now delayed.

The tankers were carrying 870,000 tonnes of crude and 670,000 tonnes of clean oil products such as gasoline, naphtha and diesel, it said.

Russia and Saudi Arabia are the top two exporters of oil through the canal, while India and China are the main importers, oil analytics firm Vortexa said. Consultancy Kpler said the canal accounted for only 4.4% of total oil flows but a prolonged disruption would complicate flows of Russian and Caspian oil to Asia and oil from the Middle East into Europe.

Joanna Konings, senior economist, International Trade Analysis at Dutch bank ING, noted the container shipping industry was used to days of delays.

But Germany’s BDI industry association was concerned. Deputy Managing Director Holger Loesch said earlier delays were already impacting production, with industries depending on raw materials or construction supply deliveries particularly affected.

About 16% of Germany’s chemicals imports arrive by ship via the Suez canal and the chief economist for the association of German chemicals and pharmaceuticals producers VCI, Henrik Meincke, said they would be affected with every day of blockage.

Ever Given’s technical manager BSM said dredgers were working to clear sand and mud from around it while tugboats in conjunction with Ever Given’s winches work to shift it.

Japanese shipowner Shoei Kisen apologized for the incident and said work on freeing the ship, which was heading to Europe from China, “has been extremely difficult” and it was not clear when the vessel would float again.

The owner and insurers face claims totaling millions of dollars even if the ship is refloated quickly, industry sources said on Wednesday. Shoei Kisen said the hull insurer of the group is MS&AD Insurance Group while the liability insurer is UK P&I Club.

The ship’s GPS signal shows only minor changes to its position over the past 24 hours.

Two professional rescue teams from the Netherlands and Japan will work with local authorities to design a more effective plan to refloat the vessel, the company leasing it, Taiwan’s Evergreen Marine Corp said.

(Reporting by Yusri Mohamed in Isamilia, Gavin Maguire and Florence Tan and Roslan Khasawneh in Singapore; additional reporting by Bart Meijer in Amsterdam, Yuka Obayashi and Sakura Murakami in Tokyo, Mark John, Dmitry Zhdannikov, Julia Payne, Carolyn Cohn and Jonathan Saul in London, Anthony Deutsch in Amsterdam, Michael Hogan in Hamburg and Rene Wagner; editing by Robert Birsel, Aidan Lewis and Philippa Fletcher)

Iran says it will quit global nuclear treaty if case goes to U.N.

By Babak Dehghanpisheh

DUBAI (Reuters) – Iran said on Monday it could quit the global nuclear Non-Proliferation Treaty (NPT) if European countries refer it to the U.N. Security Council over a nuclear agreement, a move that would overturn diplomacy in its confrontation with the West.

The 1968 NPT has been the foundation of global nuclear arms control since the Cold War, including a 2015 deal Iran signed with world powers that offered it access to global trade in return for accepting curbs to its atomic program.

The fate of the 2015 pact has been in doubt since U.S. President Donald Trump pulled the United States out of it and reimposed sanctions. Iran has responded by scaling back its commitments, although it says it wants the pact to survive.

Britain, France and Germany declared Iran in violation of the 2015 pact last week and have launched a dispute mechanism that could eventually see the matter referred back to the Security Council and the reimposition of U.N. sanctions.

“If the Europeans continue their improper behavior or send Iran’s file to the Security Council, we will withdraw from the NPT,” Iranian Foreign Minister Javad Zarif said, according to comments carried by IRNA and other Iranian news agencies.

He also said Iran could take other steps before withdrawing from the NPT, although he did not specify them.

The nuclear dispute has been at the heart of an escalation between Washington and Tehran which blew up into military confrontation in recent weeks.

The 190-member NPT bans signatories other than the United States, Russia, China, Britain and France from acquiring nuclear weapons, in return for allowing them to pursue peaceful nuclear programs for power generation, overseen by the United Nations.

The only country ever to declare its withdrawal from the NPT was North Korea, which expelled nuclear inspectors and openly tested atomic weapons. Nuclear-armed India and Pakistan never signed up, nor did Israel, which does not say whether it has nuclear weapons but is widely presumed to have them.

The West has long accused Iran of seeking to develop nuclear arms. Tehran denies this and says its goal is to master the whole process of generating electricity from nuclear energy.

A steady escalation over Iran’s nuclear plans flared into tit-for-tat military action this month, with Trump ordering a drone strike that killed a top Iranian general, prompting Iran to fire missiles at U.S. targets in Iraq. During a state of alert, Iran shot down a Ukrainian airliner in error.

Amid that escalation – one of the biggest since Iran’s 1979 revolution – Tehran has faced mounting pressure from European states which say they want to save the 2015 nuclear deal. They have also indicated a readiness to back Trump’s call for a broader deal with Iran that goes beyond its nuclear plans.

‘MAXIMUM PRESSURE’

“Despite the ill will that we see from some European countries the door of negotiations with them has not been closed and the ball is in the court of these countries,” Iranian Foreign Ministry spokesman Abbas Mousavi said.

But he also told a news conference: “I don’t think Iran is ready to negotiate under the conditions they have in mind.”

Since Washington withdrew from the deal, Trump began a policy of “maximum pressure”, saying a broader deal should be negotiated on nuclear issues, Iran’s missile program and Iranian activities in the Middle East.

U.S. sanctions have crippled Iran’s economy, slashing its oil exports. Iran has long said it would not negotiate with Washington while sanctions are in place.

Tehran has repeatedly held talks with European officials to find ways to keep the nuclear agreement alive, but has blamed the Europeans for failing to guarantee economic benefits that Iran was meant to receive in return for curbing nuclear work.

“The European powers’ claims about Iran violating the deal are unfounded,” Mousavi said. “Whether Iran will further decrease its nuclear commitments will depend on other parties and whether Iran’s interests are secured under the deal.”

In a report on a parliamentary website, Iran’s foreign minister said steps to scale back its commitments under the nuclear deal were now over.

Britain has said a “Trump deal” could replace the 2015 deal, and France has called for broad talks to end the crisis.

Iran says it cannot negotiate with Trump, who broke promises by repudiating the deal reached under his predecessor Barack Obama. Mousavi repeated Iran’s rejection of a “Trump deal”.

“The fact that a person’s name is put on an agreement shows they’re not familiar with the conditions. An agreement with a person doesn’t mean anything,” he said.

(Reporting by Parisa Hafezi and Babak Dehghanpisheh; Writing by Edmund Blair; Editing by Peter Graff)

Nervy global investors revisit 1930s playbook

Unemployed man during the Great Depression

By Mike Dolan

LONDON (Reuters) – Global investors are once again dusting off studies of the 1930s as fears of protectionism, nationalism and a retreat of globalization, sharpened by this week’s Brexit referendum, escalate anew.

With markets on tenterhooks over Thursday’s “too close to call” vote on Britain’s future in the European Union, the damage an exit vote would deal business activity and world commerce is amplified by the precarious state of the global economy and its inability to absorb any left-field political shocks.

As such, the Brexit vote will not be an open-and-shut case regardless of the outcome. Broader worries about global trade, frail growth and dwindling investment returns have festered since the banking shock of 2007/08 and have mounted this year.

Stalling trade growth has already led the world economy to the brink of recession for the second time in a decade, with growth now hovering just above the 2.0-2.5 percent level most economists say is needed to keep per capita world output stable.

Three-month averages for growth of world trade volumes through March this year have turned negative compared with the prior three months, according to the Dutch government statistics body widely cited as the arbiter of global trade data.

And it’s not a seasonal blip. Last year saw the biggest drop in imports and exports since 2009 and their average annual growth of 3 percent over the intervening seven years was itself half that of the 25 years before, according to Swiss asset manager Pictet. 2016 is set to be the fifth sub-par year in row.

A study published by the Centre For Economic Policy Research shows this paltry pace of trade growth is also below the 4.2 percent average for the past 200 years.

Foreign direct investment growth of 2 percent of world output is also at its lowest since the 1990s, while the hangover from the credit crunch has seen annual growth rates in cross-border bank lending grind to a halt from some 10 pct in the decade to 2008.

Parsing the big investment themes of the next five years, Pictet this month highlighted “globalization at a crossroads” – offering both benign and malignant reasoning and implications.

One of these was that trade deceleration was due in part to the inwards reorientation of the world’s two mega economies, the United States and China — the former due to the shale energy boom and the latter’s planned shift to consumption from exports.

Another factor cited was a shift in the world economy towards services and digital activity that is not captured by statistics on merchandise trade.

But Pictet had little doubt about what brewing developments could swamp all that — rising nationalism on the far right and left of the political spectrum in Europe and the United States.

Britain “threatens to drive a fault line” through one of the world’s biggest free trade blocs, it said, and both presumptive candidates for November’s U.S. presidential election have talked of renegotiating the still-unratified Trans Pacific Partnership binding economies making up 40 percent of world trade.

“If the rising tide of nationalism results in greater protectionism, then the decline in international trade the world has experienced so far could well morph into something more pernicious,” the Swiss firm said, adding that multinationals — particularly banks and tech companies — were most vulnerable.

“1937-38 REDUX?”

Against that backdrop, this year’s market wobbles make total sense — especially as near-zero interest rates limit central banks’ ability to insulate against further shocks.

But echoes of the last major hiatus in trade globalization during and between the World Wars has economists looking again to the 1930s for lessons and policy prescriptions.

In a paper entitled “1937-38 redux?”, Morgan Stanley economists detail the mistakes that saw monetary and fiscal policy tightened too quickly once a recovery from the 1929 stock market crash and subsequent Depression started in 1936.

Over-eagerness to reset policy before private sector confidence in future growth and inflation had picked up saw a relapse into recession and deflation by 1938. The devastation of World War Two followed, and with it huge government spending on military capacity, war relief and eventually reconstruction.

Morgan Stanley goes on to draw a parallel with the global response to 2008’s crash and subsequent world recession.

Waves of monetary and fiscal easing by 2009 underpinned economic activity, but government budgets have again tightened quickly and before inflation expectations or private investment spending and capital expenditure have been restored.

The second world recession in a decade is now seen as a threat, but with a heavier starting debt burden, historically low inflation and interest rates, stalled trade and a worsening demographic profile. That could mean another global government spending stimulus is needed to re-energize private firms.

“The effective solution to prevent relapse into recession would be to reactivate policy stimulus,” Morgan Stanley said.

Success in preventing a new recession without the cataclysm of a world war would be a profound lesson learned. Political extremism, isolation and protectionism make the task far harder.

(Editing by Catherine Evans)

U.S. goods trade deficit narrows sharply in boost to first-quarter GDP

Freight and Cargo

WASHINGTON (Reuters) – The U.S. goods trade deficit narrowed sharply in March as imports tumbled, suggesting economic growth in the first-quarter was probably not as weak as currently anticipated.

The Commerce Department said in its advance report on Wednesday that the goods trade gap fell to $56.90 billion last month from $63.44 billion in February.

March’s comprehensive trade report, which includes services, will be released next Wednesday.

Goods imports fell 4.4 percent to $173.6 million last month, outpacing a 1.2 percent drop in exports.

The small goods deficit suggested there could be an upside surprise in gross domestic product growth for the first quarter. Economists polled by Reuters have forecast GDP rising at a 0.7 percent annualized rate in the first three months of the year.

“It suggests that first-quarter GDP growth will be much stronger than we previously believed,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

“We now estimate that first-quarter GDP growth was 1.4 percent annualized, whereas we previously thought it would be only 0.8 percent.”

The government is scheduled to publish its advance first-quarter GDP growth estimate on Thursday.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Oil prices fall as investors faith in rally wanes

By Amanda Cooper

LONDON (Reuters) – Oil prices fell on Tuesday, reflecting growing concerns that a two-month rally may be in danger of fizzling, while analysts forecast another rise to record levels for U.S. crude stockpiles.

The oil price has risen by more than 45 percent since mid-February ahead of a meeting next month of the world’s major producers to discuss an output freeze to support prices. But there is growing scepticism about the outcome of the meeting.

“The amount of verbal intervention, which has obviously helped the market greatly over the past two months, combined with a production slowdown in the U.S., has probably taken (oil) as far as it can, now the market really wants to see some action,” Saxo Bank senior manager Ole Hansen.

“We’re seeing more and more commentators raise the flag and saying ‘have we seen too much, too soon?’ in terms of the rally across the sector.”

Brent crude futures <LCOc1> fell by $0.96 to $39.31 a barrel by 1124 GMT (7.24 a.m. ET), having lost some six percent in the last six trading days, while U.S. crude <CLc1> fell 78 cents to $38.60.

OPEC and other major suppliers, including Russia, are to meet on April 17 in Doha to discuss an output freeze aimed at bolstering prices.

But with ballooning global inventories, signs some OPEC members are losing market share, plus little evidence of a strong pick-up in demand, analysts said oil is likely to trade in a range.

“There is a rebalancing on the way, but we are still running a surplus and stocks are building up as far as we can see,” SEB commodities analyst Bjarne Schieldrop said.

“There is a clear risk for a pull-back in Brent crude oil with a return to deeper contango again. Long positioning in Brent is at record high and vulnerable for a bearish repositioning.”

Data on Monday from the InterContinental Exchange showed speculators hold the largest net long position in Brent futures on record. [O/ICE]

U.S. commercial crude oil stockpiles were expected to have reached record highs for a seventh straight week, while refined product inventories likely fell, a preliminary Reuters survey showed late on Monday. <API>

Barclays said in a note on Monday net flows into commodities totaled more than $20 billion in January-February, the strongest start to a year since 2011, and prices could fall 20 to 25 percent if that were reversed.

(Additional reporting by Aaron Sheldrick in TOKYO; Editing by Jane Merriman and Susan Thomas)