Maps are such boring things…metaverse, cyber that’s the place to be. Right until you need to move physical stuff, which the world depends on around the world. The Pandemic showed that moving physical stuff is still v. important to the world, and when container shipping rates jumped from about 2k to 8k to move stuff across the Pacific we all felt it.
And now we have supply chain pandemonium part two (three if you insist on talking about the Panama canal drying up…the worst drought…wait for it…since the 1950s!!!…but yes climate change.) Those kind folks in Yemen, the Houthis, have decided to lob missiles and drones at ships passing through the Bab el-Mandeb Strait which has got many of the shipping companies right on edge. Nice map from the FT:1
Now who should care about this? Well the good old consumer will as 12% of world trade passes thru the Suez canal, and yes back to that other canal, 5% passes thru the Panama one.2 So if you want those crackless crackers (yes, seems the killjoys have decided that the thing that makes a noise in a cracker is wrong somehow) you maybe paying a bit more, or a lot, for them. And same goes for everything else. Maybe those central bankers will be revising the spreadsheets they have for inflation coming down in the new year a touch up as geo-political events bite them in the arse. Again.
But what about those pesky second and third order effects uh?
Well the first one I can see is that de-coupling, or nearshoring or whatevs you want to call it getting another nudge in the back. Mexico seems to be nailed on as a good bet for more things to be assembled / manufactured going forward than parts of the Asian region. Much easier for things to be made there and shipped across the border to West and East Coast US, than the hassle of either the Panama Canal being blocked or transhipping across the CONUS for East Coast folks.
The other one that might have a bit of wind out taken of their sails is India…if the Suez becomes such a problem, then you could see the Malacca Straits as being another problem child about to be borne. The nearshoring might just drive a bit of demand into Africa, say Morocco as a guess.
But there is another one…right now the defender of the High Seas, the United States Navy, as ever is getting its exercise on by shooting anything that flies right now. I’m sure the Brits and maybe another couple of EU nations will join in for the giggles soon. There is a conspicuous absence in that list. Who has the largest navy in the world right now? Who likely has the most interest in global shipping traffic flowing freely? Yup, our friends the Chinese seem to be a bit gun shy on this one.
If you are going to buy all those shiny toys, usually the military gets all antsy to play with them. But, what if those thousand year thinkers the Chinese have got themselves in a pickle? Perhaps their axis of resistance club membership isn’t so smart after all, like where do the Houthis get their drones and missiles from? Iran. Who do those lovely Persians get their bits to assemble said drones and missiles from? Oopsie. China. Would be a terrible blow to Chinese prestige if one of their brand spanking new Type 55 Cruisers got all beat up by a Chinese manufactured drone.
There could also another reason why the Chinese aren’t willing to join the party…their kit is junk and they know it. But that would be buying into the reality that Chinese weapons aren’t that crash hot at times.
Hey ho. Time will tell. But for some reason my cat brain gut is going for the Chinese won’t get involved. And that will be very telling.
https://www.afr.com/world/middle-east/shipping-giant-halts-red-sea-route-in-blow-to-global-trade-20231216-p5erwd
On the Chinese - let's not forget that they have a naval base in Dijibouti, right on the Bab-El-Mendeb!