During the first two months of 2024, because of Red Sea attacks, Suez Canal traffic was down by 50 percent. The alternate routes, longer delivery times, and fewer ports, add up to big numbers:
Also though, we can look at many smaller stories.
Tea Trade Disruptions
Exceeding coffee, at 100 million cups a day, tea is a UK favorite. NPR spoke with women that drank four to six cups a day. Possibly affecting a whopping 50 billion cups a year, the UK tea supply could be “temporarily disrupted” by Red Sea delays of an extra 10-14 days. Consequently, as word spread, some have already begun stocking up.
On a shelf of Yorkshire Tea, this sign notified consumers of supply problems:
Below you can see why the UK tea that comes from India, China, Sri Lanka, and Kenya, travels the Red Sea/Suez route:
Taking the next step to Europe, we would see Tesla and Volvo parts delays. Tesla’s Berlin plant had a two week shutdown, Similarly, Volvo had to halt some production in Belgium because of delayed gear box deliveries.
Then, multiplied, the stories created country-wide distress. During January, Egypt’s Suez Canal revenue plunged by 40 percent. As hotel and cruise bookings sunk, we heard from one onlooker that there were more guides than tourists. The problem is the foreign exchange that Egypt needs to import food and pay its debt.
From there, this Red Sea ripple even extends to Yiwu, a commodity center near Shanghai. A maker of low end commodities like billions of socks for Walmart, Yiwu’s producers report escalating shipping container rates that are up from $2,000 USD to $5,500 for 20 foot containers.
Our Bottom Line: Fractal Economics
Always, with posts like today’s I like to return to the coast of Great Britain, Explained by a classic paper from mathematician Benoit Mandelbrot, the shorter the ruler, the longer and longer (and longer) the coast. Or, thinking of the trade disruptions in the Red Sea, the closer you look, the more you see:
And along the British coast, we could see less tea.
My sources and more: When my IMF blog email combined with the BBC’s World Business Report podcast, the results were big and small. They took me to the large numbers that display the massive impact. But also, they were an accumulation of story after story. Those stories included the UK’s tea supply, here and here, and electric vehicles Also, they added up to Egypt’s plight and an econlife update.
