☀️☕️ Houthi New Year for Maersk

📝 Focus

• Houthi New Year for Maersk

📊 In the Markets

• BYD > Tesla, Bitcoin $45k

📖 MoneyFitt Explains

• 🎓️ Bitcoin

💸 Personal Finance Corner

• The Power of Giving: Discovering the Joy and Benefits of 4 Non-Monetary Contributions

📝 Focus

Houthi New Year for Maersk

Denmark's Maersk and German competitor Hapag-Lloyd both declared that their ships would avoid the Red Sea route connected to the Suez Canal. The Sunday morning attack on one of their vessels by Yemen-based Houthi militants had led to a 48-hour pause in all Red Sea sailings by Maersk. Attacks on ships in the Red Sea had started in October in retaliation for Israeli actions in Gaza, leading to several earlier pauses. In a sharp escalation of violence in the Red Sea, US Navy helicopters responding to the distress call came under fire from the three boats and killed all the attackers.

Both shipping giants are now re-routing their vessels via the Cape of Good Hope, right by the southernmost point of Africa, increasing delivery costs and sparking concerns of global inflation. This extends travel by 6,000 nautical miles and several weeks. It could cost up to $1 million extra in fuel for each round trip between Asia and northern Europe, but there is no alternative to what was the only sea route before the Suez Canal’s opening 155 years ago. It is still the only route for ships that are too large for the canal.

But it’s hardly a disaster for the shipping companies: both Maersk and Hapag-Lloyd saw their shares surge on expectations of container shipping freight increases, with other shipping companies like CMA-CGM also planning to increase rates. Why? The extended time at sea effectively “shrinks” global fleet capacity by 20%.

 ..... ▷ The Suez Canal is a vital route for over 20,000 annual ship passages (over 50 a day), and is a crucial route for both goods and fossil fuels between Asia and Europe. 

Using the Canal can save 20% to 40% in shipping costs compared to the longer Cape route by directly impacting fuel consumption, crew expenses, and insurance for the cargo carried. 

And then there are the toll fees, which vary based on ship size and cargo, ranging from hundreds of thousands to millions per voyage. In the year to June 2023, tolls collected hit a record total of $9.4bn.

 ..... ▷ The extended time at sea will also lead to challenges in returning empty ships and containers to Asia, impacting supply chain reliability. 

The six-day 2021 Ever Given blockage, in which the 400 metre-long ship ran aground and blocked the entire canal, is estimated to have cost the global economy between $6-10 billion per day due to delays in shipments of goods like oil, electronics, and other vital supplies. The incident threw global supply chains into chaos, causing delays and shortages of numerous products worldwide, with a ripple effect on other industries, including manufacturing, retail and consumer goods.

This highlighted the Cape route's importance, and a prolonged Suez closure might again lead to consumer product shortages. 

But many manufacturers have been shaken by that earlier closure, and partly from geopolitical concerns in general, already started shifting from efficient, “just in time” supply chains to resilient but less efficient models with increased emergency stockpiles (“just in case”.)

 ..... ▷ The Suez Canal, completed in 1869, revolutionised global trade by providing a crucial shortcut between the Mediterranean and Red Seas through Egypt, which was under colonial rule by Britain and France at the time.

The canal was owned by the Egyptian government, but it was European shareholders, mostly British and French, who owned the concessionary company which operated it and which saw the bulk of the profits.

Its strategic significance surged as a key maritime route, cutting travel distances for vessels moving between Europe and Asia by thousands of miles. 

In 1956, the Suez Crisis erupted when Egypt nationalised the canal, leading to a British–French–Israeli invasion of Egypt that aimed to regain control of the canal and remove Egyptian president Nasser from power. However, international pressure and condemnation led to the withdrawal of the forces and humiliation for the British and the French.

🇸🇬 Singapore: Let’s Get MoneyFitt!