- The number of vessels passing through the Suez and Panama Canal have dropped by 50%, Apollo's chief economist noted.
- That has boosted freight costs as vessels reroute and take longer journeys.
The number of vessels passing through the Suez Canal and Panama Canal have dropped 50% from normal levels, according to Apollo Management's top economist.
And that risks triggering another run-up in inflation as the price of shipping becomes more expensive, Torsten Sløk warned in a note on Sunday.
"The bottom line is that higher transportation costs are putting upward pressure on goods inflation," he wrote.
That matters because if inflation begins bubbling again, $4 could be weakened. Here are three charts that explain what's going on.
Suez Canal slowdown
About 12% of global trade passes through the Suez Canal, according to an estimate from the US Naval Institute.
"Normally, 200 ships travel through the Suez Canal from south to north over a week, but that number has recently declined to 100," Sløk wrote.
The trouble in the Suez Canal has been ratcheting up as Yemen-based Houthi rebels have been launching attacks against ships in the Red Sea, forcing some ships to take longer — and costlier — detours. The ruckus has $4 and even trickled into other commodities, $4
Panama woes
What's slowing down shipping in the Panama Canal is different. A severe drought has dried up the waterway, creating a massive snarl-up because fewer vessels are now able to transit through the trade corridor at a time.
The canal normally handles about $4 But due to the traffic-jam, northbound traffic has fallen to 45 ships per week from the typical 90 ships.
The waterway is so clogged, that authorities have $4 for companies to bid on options to jump the line. One Japanese shipping company $4 in November.
Inflation déjà vu
The slowdown has boosted the cost of shipping: vessels have$4 and add several days to their voyages, which makes carting around global goods a lot more expensive. Sløk noted that freights traveling from Shanghai to Rotterdam have seen costs triple.
Another tracker, the Drewry World Container Index, shows container costs have surged by 173% since the beginning of December.
And although $4, higher shipping costs could send that back up again if they continue to follow recent trends.
Strategists at Macquarie have noted that the shipping woes are reminiscent of $4, which sparked a dizzying spell of inflation that has yet to completely cool.
"Shipping freight rates foretold the future inflation-disinflation cycle in late 2020 to mid-2022, and are thus worth paying attention to," analyst Thierry Wizman wrote in a note on Friday.