Transportation costs fall as Suez disruption eases

• Prices reach new 2024 low
• Supply chain capacity to spare
• Raw material demand rises

Global transportation costs fell last month to their lowest level since December as the diminishing impact of Suez Canal disruption led container rates to decline. 

Latest data shows no discernible impact on supplies from either the Red Sea attacks or from reduced capacity on the Panama Canal, with businesses adjusting to longer delivery schedules.

The GEP Global Supply Chain Volatility Index, an indicator tracking demand conditions, shortages, transportation costs, inventories and backlogs based on a monthly survey of 27,000 businesses, fell for the first time this year to -0.32.

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A value below 0 indicates that supply chain capacity is being underused, which reduces volatility.

Underlying data shows this is due to manufacturers using up excess stock, some of which was accumulated because of Red Sea disruptions.

The figures back up a report published by the World Trade Organization last week that said disruptions to Red Sea maritime trade are proving less severe than feared.

Around 15 percent of global trade passes through the Red Sea and 12 percent through the Suez Canal’s northern exit, the WTO estimates.

• Volumes up at Saudi ports in spite of Red Sea attacks
• Egypt plans extension to make Suez Canal a ‘dual carriageway’
• GCC companies safeguard stocks against Red Sea crisis

Since mid-November Yemen’s Ansar Allah group, widely referred to as Houthis, have attacked ships in the Red Sea that they believe are linked to Israel in response to the Gaza conflict.

According to the latest GEP Index – which is derived from S&P Global’s private sector non-oil business surveys – global demand for raw materials, commodities and components continued to recover in March, with India and China leading the rebound. 

“In March, orders placed with Asia’s suppliers ramped up, which is a strong signal of accelerating growth in manufacturing in the coming months,” said GEP president and co-founder Roopa Makhija.

There was also a sharp reversal in global inventories in March, partly reflecting the winding down of surpluses that had built up. Reports of safety stockpiling were at their lowest since November 2019, before the pandemic.