MFAT: Implications of shipping disruptions in the Red Sea – February 2024
SUMMARY
Houthi attacks on commercial shipping in the Red Sea are currently disrupting goods trade between Europe and New Zealand, leading to many shipping companies now avoiding transit through the Suez Canal.
Exacerbating these global maritime trade challenges, the events in the Red Sea come at a time when shipping via other routes (namely the Panama Canal) are also facing capacity constraints.
Europe, the UK, and North Africa are a sizable source of goods trade for New Zealand. In the year to September 2023, 11% ($7.7bn) of New Zealand’s goods exports and 20% ($15.7bn) of goods imports were traded with these regions.
Some New Zealand exporters are already reporting shipping delays, rising transport costs, and in some cases cancelled export orders. These impacts are likely to worsen as we move into New Zealand’s peak exporting period to Europe from April to May.
Europe is a major source of machinery, vehicles, retail medicines, and vaccines, with North Africa a key fertiliser provider. As a result, the disruptions could also impact New Zealand households and businesses through price rises for some imported goods. However, there is limited evidence to date that shipping disruptions have added to existing inflationary pressures.
Shipping and logistics companies are adapting to current disruptions by increasing long-haul shipping between Europe and Asia, utilising a land bridge over the Arabian Peninsula, and setting up new transhipment hubs in the Mediterranean.