1 00:00:00,120 --> 00:00:02,720 Speaker 1: Earlier today, the Secretary of State announced the designation of 2 00:00:02,720 --> 00:00:07,520 Speaker 1: the Huthis as a specially designated Global terrorist effective February sixteenth, 3 00:00:07,560 --> 00:00:10,600 Speaker 1: for threatening the security of the United States. These attacks 4 00:00:10,600 --> 00:00:13,960 Speaker 1: against international shipping have endangered mariners and disrupted the free 5 00:00:14,000 --> 00:00:17,599 Speaker 1: flow of commerce and freedom of navigation for the past 6 00:00:17,600 --> 00:00:20,200 Speaker 1: several weeks. The United States, with allies and partners around 7 00:00:20,239 --> 00:00:22,759 Speaker 1: the world, has made clear that there must be consequences 8 00:00:22,760 --> 00:00:23,560 Speaker 1: for those attacks. 9 00:00:24,960 --> 00:00:28,479 Speaker 2: As the fighting between Israel and Hamas rages on, the 10 00:00:28,520 --> 00:00:31,040 Speaker 2: effects of the conflict are starting to spill over into 11 00:00:31,040 --> 00:00:34,200 Speaker 2: the rest of the region. In response to the ongoing war, 12 00:00:34,440 --> 00:00:38,440 Speaker 2: the Huthis, a Yemeni militant group, began firing rockets and 13 00:00:38,440 --> 00:00:43,040 Speaker 2: conducting drone strikes against Israel on October nineteenth. Soon after, 14 00:00:43,360 --> 00:00:47,920 Speaker 2: the Uthis employed an additional tactic, attacking commercial shipping vessels 15 00:00:47,920 --> 00:00:50,160 Speaker 2: in the Red Sea on the way to and from 16 00:00:50,240 --> 00:00:53,600 Speaker 2: the Suez Canal, a crucial artery for global trade that 17 00:00:53,640 --> 00:00:59,600 Speaker 2: connects Asia with Europe. Israeli allies, including the US and UK, 18 00:01:00,080 --> 00:01:02,920 Speaker 2: have since responded with airstrikes of their own to try 19 00:01:02,920 --> 00:01:06,640 Speaker 2: and deter these attacks, but freight companies are already wary. 20 00:01:07,120 --> 00:01:10,399 Speaker 2: They've largely redirected their ships to take alternate routes that 21 00:01:10,440 --> 00:01:18,080 Speaker 2: are significantly longer today on the show, what these disruptions 22 00:01:18,120 --> 00:01:21,240 Speaker 2: mean for the global economy now and in the long run, 23 00:01:21,600 --> 00:01:24,160 Speaker 2: and what companies are doing to secure their supply chain. 24 00:01:24,800 --> 00:01:28,600 Speaker 2: From Bloomberg News, this is the big take. I'm Sarah Holder. 25 00:01:38,600 --> 00:01:42,640 Speaker 2: International shipping has faced some complications in recent years, none 26 00:01:42,840 --> 00:01:45,080 Speaker 2: more damaging than the COVID pandemic. 27 00:01:45,600 --> 00:01:50,440 Speaker 3: Supply chains were squeezed during the pandemic to extraordinary levels, 28 00:01:50,560 --> 00:01:54,120 Speaker 3: but in twenty twenty three, costs of shipping came down 29 00:01:54,200 --> 00:01:58,480 Speaker 3: dramatically and goods flowed smoothly around the world and broadly speaking, 30 00:01:58,800 --> 00:01:59,960 Speaker 3: supply lines were functioning. 31 00:02:00,480 --> 00:02:04,640 Speaker 2: And the current writes about the global economy for Bloomberg News. 32 00:02:04,400 --> 00:02:06,520 Speaker 3: Well, if you thought all the problems were ironed out, 33 00:02:06,640 --> 00:02:09,760 Speaker 3: what's happening in the Red Sea is a very blunt 34 00:02:09,760 --> 00:02:12,560 Speaker 3: reminder that those problems haven't gone away at all. 35 00:02:13,240 --> 00:02:16,080 Speaker 2: And this spoke with our producer Alex Sagira about the 36 00:02:16,080 --> 00:02:18,080 Speaker 2: ongoing situation in the Red Sea. 37 00:02:18,240 --> 00:02:20,960 Speaker 4: Then you take us through what this disruption actually looks like. 38 00:02:21,160 --> 00:02:24,600 Speaker 4: For instance, where do these ships go instead of through 39 00:02:24,800 --> 00:02:25,359 Speaker 4: the Red Sea? 40 00:02:25,919 --> 00:02:29,440 Speaker 3: So the practicalities of This is that these ships get 41 00:02:29,480 --> 00:02:33,280 Speaker 3: loaded up with say, merchandise goods right around East Asia 42 00:02:33,639 --> 00:02:35,799 Speaker 3: and they sail through the Red Sea on the way 43 00:02:35,840 --> 00:02:39,640 Speaker 3: to the Suez Canal, primarily for the European market, but 44 00:02:39,720 --> 00:02:42,920 Speaker 3: not only for the European market. It also serves America 45 00:02:42,960 --> 00:02:45,440 Speaker 3: from that side of the world. But what's happening now, 46 00:02:45,440 --> 00:02:47,920 Speaker 3: of course, is due to the conflict in the Red Sea, 47 00:02:48,120 --> 00:02:50,840 Speaker 3: that's more or less cutting off the Suez Canal for 48 00:02:50,880 --> 00:02:53,919 Speaker 3: a lot of international shippers, and instead they're going right 49 00:02:53,960 --> 00:02:56,720 Speaker 3: around the bottom of the South of Africa, around the 50 00:02:56,760 --> 00:02:59,200 Speaker 3: Cape of Good Hope and heading up the Long Way. 51 00:02:59,240 --> 00:03:01,280 Speaker 2: And the numbers are pretty staggering. 52 00:03:01,919 --> 00:03:04,600 Speaker 3: The International Monetary Fund has run some numbers and they 53 00:03:05,040 --> 00:03:08,880 Speaker 3: estimate that transit volume through the Suez Canal is down 54 00:03:08,960 --> 00:03:12,120 Speaker 3: by around thirty seven percent up to about mid January 55 00:03:12,160 --> 00:03:15,200 Speaker 3: compared with a year earlier. And then the correlation of 56 00:03:15,240 --> 00:03:18,280 Speaker 3: that is that volumes going around the Cape of Good 57 00:03:18,320 --> 00:03:21,480 Speaker 3: Hope have surged by around fifty four percent. 58 00:03:21,840 --> 00:03:24,240 Speaker 4: What are analysts telling you about the long term or 59 00:03:24,240 --> 00:03:27,040 Speaker 4: even medium term impacts of these attacks. 60 00:03:26,840 --> 00:03:28,680 Speaker 3: So there's a kind of a benign take on all 61 00:03:28,680 --> 00:03:31,800 Speaker 3: of this. The beninn take is, look this conflict will 62 00:03:31,800 --> 00:03:36,120 Speaker 3: de escalate, it's happened before, and ultimately security will be 63 00:03:36,160 --> 00:03:38,720 Speaker 3: restored and these ships can return to the Red Sea 64 00:03:38,760 --> 00:03:41,120 Speaker 3: and in the Swez Canal, And even if it's not for 65 00:03:41,200 --> 00:03:44,120 Speaker 3: the moment, there are alternatives around the South of Africa, 66 00:03:44,200 --> 00:03:46,400 Speaker 3: and of course there's plenty of freight options out there. 67 00:03:46,440 --> 00:03:49,480 Speaker 3: That's the kind of hopeful take. But those same people 68 00:03:49,520 --> 00:03:52,000 Speaker 3: will also say to you, the longer this drags on, 69 00:03:52,520 --> 00:03:54,840 Speaker 3: the more worrying it will become. 70 00:03:55,800 --> 00:03:59,800 Speaker 2: Those concerns are centered on rising costs for manufacturers, freight 71 00:04:00,120 --> 00:04:00,840 Speaker 2: end consumers. 72 00:04:01,200 --> 00:04:04,320 Speaker 3: There's a dual impact on the world economy here. On 73 00:04:04,360 --> 00:04:08,200 Speaker 3: the one hand, you have the extra shipping costs and 74 00:04:08,240 --> 00:04:10,720 Speaker 3: the extra freight costs associated with this conflict in the 75 00:04:10,800 --> 00:04:14,640 Speaker 3: Red Sea is sparking worries that ultimately this might mean 76 00:04:14,760 --> 00:04:18,479 Speaker 3: higher prices for consumers, which of course means faster inflation 77 00:04:18,560 --> 00:04:20,680 Speaker 3: at a time when the world is hoping inflation is 78 00:04:20,720 --> 00:04:21,320 Speaker 3: slowing down. 79 00:04:21,800 --> 00:04:24,160 Speaker 2: It isn't just the price of consumer goods that will 80 00:04:24,240 --> 00:04:27,960 Speaker 2: rise from these disruptions. The Seuez Canal is also how 81 00:04:28,000 --> 00:04:29,279 Speaker 2: Europe gets its oil. 82 00:04:29,960 --> 00:04:34,080 Speaker 3: There's also though, the impact on energy costs because if 83 00:04:34,120 --> 00:04:37,360 Speaker 3: its conflict continues, if it deepens if it broadens out 84 00:04:37,400 --> 00:04:39,320 Speaker 3: in the rest of the region. The concern is there, 85 00:04:39,360 --> 00:04:42,360 Speaker 3: of course, is two things. A energy won't be able 86 00:04:42,360 --> 00:04:43,839 Speaker 3: to be shipped through that part of the world, and 87 00:04:43,920 --> 00:04:46,520 Speaker 3: again it's a crucial artery for a energy and b 88 00:04:46,720 --> 00:04:48,960 Speaker 3: the cost of oil could go higher. 89 00:04:49,240 --> 00:04:51,920 Speaker 2: In his reporting, and just spoke not just with analysts 90 00:04:52,000 --> 00:04:55,320 Speaker 2: and economists, but also with business owners who are already 91 00:04:55,360 --> 00:04:57,560 Speaker 2: scrambling to solve these supply chain issues. 92 00:04:58,880 --> 00:05:02,279 Speaker 3: One of those I spoke to was Hans vand and Elsen. 93 00:05:02,680 --> 00:05:05,960 Speaker 3: He runs an Arizona based company called Yoyo Factory. They 94 00:05:06,000 --> 00:05:08,560 Speaker 3: make their yoyos in Shenzen, and they make it for 95 00:05:08,680 --> 00:05:12,600 Speaker 3: markets that include the US, Canada, and Mexico, across Europe 96 00:05:12,680 --> 00:05:15,400 Speaker 3: and Japan. So he's on both sides of this. He's 97 00:05:15,400 --> 00:05:18,120 Speaker 3: getting his goods across the specific to America, okay, but 98 00:05:18,200 --> 00:05:21,120 Speaker 3: he also has to get his goods from Shenzen to Europe, 99 00:05:21,279 --> 00:05:24,200 Speaker 3: and that's where he's getting a little bit worried about 100 00:05:24,200 --> 00:05:27,080 Speaker 3: how this conflict does play out. You know, if it's 101 00:05:27,080 --> 00:05:30,640 Speaker 3: a near term we'll say de escalation, then he's not 102 00:05:30,680 --> 00:05:33,240 Speaker 3: too concerned about the overall hit to his business, the 103 00:05:33,279 --> 00:05:36,039 Speaker 3: overall hit to his costs he'll get his yoyos to 104 00:05:36,160 --> 00:05:39,560 Speaker 3: Europe and time. But the longer this drags on, the 105 00:05:39,640 --> 00:05:42,239 Speaker 3: more worry he's getting. And that's why he's talking about, 106 00:05:42,480 --> 00:05:44,120 Speaker 3: you know, the time for him to build up his 107 00:05:44,160 --> 00:05:46,760 Speaker 3: inventory of stocks to make sure he doesn't run low. 108 00:05:47,000 --> 00:05:48,760 Speaker 3: He's keeping an eye on the costs of all of 109 00:05:48,760 --> 00:05:50,640 Speaker 3: this and how much of it he can pass on 110 00:05:50,720 --> 00:05:53,760 Speaker 3: to his customers, and of course he's looking for alternatives. 111 00:05:54,080 --> 00:05:56,960 Speaker 3: One possible idea he spoke about was he could ship 112 00:05:57,000 --> 00:06:00,000 Speaker 3: his produce from Shenzen over to the US and from 113 00:06:00,000 --> 00:06:03,200 Speaker 3: when you asked, across to Europe. That gets the product there, 114 00:06:03,640 --> 00:06:05,440 Speaker 3: but that will be extra cost. 115 00:06:06,520 --> 00:06:10,240 Speaker 2: Those analysts, business owners and even governments are trying to 116 00:06:10,279 --> 00:06:13,600 Speaker 2: adapt in real time, but it's hard to anticipate how 117 00:06:13,640 --> 00:06:17,120 Speaker 2: the conflict will unfold after the break. What are the 118 00:06:17,160 --> 00:06:20,080 Speaker 2: prospects for de escalation in the Red Sea and what 119 00:06:20,120 --> 00:06:30,680 Speaker 2: can companies do to make their supply chains safer against shocks. 120 00:06:31,800 --> 00:06:35,719 Speaker 2: We're back earlier. Our colleague Enda was describing the hope 121 00:06:35,720 --> 00:06:38,680 Speaker 2: that these Red Sea attacks could cease sooner rather than later. 122 00:06:39,360 --> 00:06:42,280 Speaker 2: But I wanted to talk with Bloomberg's Mohammed Hattem, who 123 00:06:42,320 --> 00:06:45,880 Speaker 2: reports on economics and politics in Yemen. For some background 124 00:06:45,880 --> 00:06:48,000 Speaker 2: on the huthis, what's happening on the ground in the 125 00:06:48,040 --> 00:06:51,360 Speaker 2: country and the chances in the short term for de escalation. 126 00:06:52,080 --> 00:06:55,440 Speaker 2: We spoke earlier via zoom. Have you spoken with any 127 00:06:55,520 --> 00:06:58,600 Speaker 2: Houthi representatives who've shared more about their strategy. 128 00:06:59,279 --> 00:07:02,839 Speaker 5: I talked to one of their leaders, Muhammad aal Buffetti, 129 00:07:02,920 --> 00:07:05,080 Speaker 5: and he was telling me that they will not stop, 130 00:07:05,160 --> 00:07:08,599 Speaker 5: you know, these kind of attacks until you know the 131 00:07:08,839 --> 00:07:13,000 Speaker 5: end of Israeli offensive, because he said, this is a 132 00:07:13,040 --> 00:07:16,320 Speaker 5: good opportunity for them to show. Also there might and 133 00:07:16,520 --> 00:07:20,880 Speaker 5: strange region wise and maybe across the globe. 134 00:07:20,760 --> 00:07:24,080 Speaker 2: That global influence is underscored by the amount of international 135 00:07:24,120 --> 00:07:27,040 Speaker 2: trade being disrupted by their attacks on vessels in the 136 00:07:27,040 --> 00:07:31,480 Speaker 2: Red Sea. According to Flexport, a digital logistics platform, over 137 00:07:31,560 --> 00:07:34,640 Speaker 2: five hundred container ships have already been rerouted away from 138 00:07:34,640 --> 00:07:37,480 Speaker 2: the seas canal, which is about a quarter of the 139 00:07:37,480 --> 00:07:40,680 Speaker 2: world shipping capacity. What are you hearing from people on 140 00:07:40,720 --> 00:07:41,880 Speaker 2: the ground in Yemen. 141 00:07:42,440 --> 00:07:45,720 Speaker 5: Yemen has been under a sort of brutal, you know, 142 00:07:45,800 --> 00:07:49,000 Speaker 5: conflict that has been dragging four years. It has created 143 00:07:49,040 --> 00:07:53,920 Speaker 5: a massive suffering, It has created the very dire humanitarian 144 00:07:53,960 --> 00:07:57,600 Speaker 5: situation and the UN describe it as the world's wars 145 00:07:57,680 --> 00:08:01,760 Speaker 5: humanitarian crisis. Now they are into another conflict and we 146 00:08:01,800 --> 00:08:04,040 Speaker 5: don't know for how long it's going to take and 147 00:08:04,080 --> 00:08:09,840 Speaker 5: how it will turn. So there is a sort of uncertainty, 148 00:08:09,960 --> 00:08:14,080 Speaker 5: a sort of concern, a sort of worry about the situation. 149 00:08:15,080 --> 00:08:18,360 Speaker 2: US and UK air strikes have targeted Houthi weapons caches 150 00:08:18,640 --> 00:08:21,040 Speaker 2: in hopes of sending a message that these attacks will 151 00:08:21,040 --> 00:08:24,960 Speaker 2: have serious consequences, but the Huthis have kept attacking anyway. 152 00:08:25,680 --> 00:08:28,480 Speaker 2: I asked Mohammed, when all this fighting could end, what 153 00:08:28,600 --> 00:08:31,920 Speaker 2: are the prospects for de escalation in the Red Sea. 154 00:08:32,280 --> 00:08:35,160 Speaker 5: The hohoth Is on their side, they are not detered, 155 00:08:35,200 --> 00:08:38,920 Speaker 5: you know, by any attacks by strikes, by the warning 156 00:08:39,000 --> 00:08:42,679 Speaker 5: by the UN Security Council resolution, and they are determined 157 00:08:42,720 --> 00:08:45,640 Speaker 5: to continue these attacks on the ships. They said, these 158 00:08:45,640 --> 00:08:49,160 Speaker 5: ships are bound to Israel and we will try to 159 00:08:49,200 --> 00:08:54,240 Speaker 5: stop them. But the Americans and the international community consider 160 00:08:54,280 --> 00:08:56,960 Speaker 5: what the Houthis are doing. It's not an attack on 161 00:08:57,000 --> 00:09:00,000 Speaker 5: the Israeli ships, but attack on the international trade because 162 00:09:00,160 --> 00:09:03,080 Speaker 5: they have touched the nerves of the economy of the 163 00:09:03,120 --> 00:09:07,760 Speaker 5: international community. And I think the International Committee has responded 164 00:09:07,840 --> 00:09:12,440 Speaker 5: to this, and the response has been also gradually you 165 00:09:12,480 --> 00:09:17,679 Speaker 5: know it's not. But with this determination of the houses 166 00:09:17,760 --> 00:09:21,880 Speaker 5: to continue and they're firing attacks, and now they are attacking, 167 00:09:22,280 --> 00:09:25,440 Speaker 5: we will see more and more exclation. And I think 168 00:09:25,559 --> 00:09:29,800 Speaker 5: maybe the Americans they will escalate along with their allies 169 00:09:30,320 --> 00:09:35,439 Speaker 5: further in the future, and then maybe it will develop 170 00:09:35,520 --> 00:09:42,920 Speaker 5: into a sort of killing maybe healthy leaders, massive operations 171 00:09:43,000 --> 00:09:48,080 Speaker 5: or massive strikes, and I think we are likely to 172 00:09:48,200 --> 00:09:51,319 Speaker 5: see a long term conflict that is not going to 173 00:09:51,559 --> 00:09:52,040 Speaker 5: end soon. 174 00:09:53,440 --> 00:09:56,400 Speaker 2: Companies caught in the crossfire are pondering ways to harden 175 00:09:56,480 --> 00:09:58,000 Speaker 2: their manufacturing infrastructure. 176 00:09:58,600 --> 00:10:02,040 Speaker 3: Here's and again, industry executors say, this just puts another 177 00:10:02,080 --> 00:10:07,280 Speaker 3: focus in the whole story of near shoring, friend shoring, relocating, 178 00:10:07,360 --> 00:10:10,720 Speaker 3: diversifying your industrial manufacturing base, making sure you are not 179 00:10:10,920 --> 00:10:14,240 Speaker 3: vulnerable assumaty supplied choke points around the world, be it war, 180 00:10:14,559 --> 00:10:16,360 Speaker 3: be it disease, be it climate. 181 00:10:16,679 --> 00:10:18,800 Speaker 2: At the core of these strategies is a focus on 182 00:10:18,840 --> 00:10:23,160 Speaker 2: how to streamline production and avoid middleman. Brandon Daniels, CEO 183 00:10:23,240 --> 00:10:26,880 Speaker 2: of logistics firm Exeger, recently spoke on Bloomberg TV about 184 00:10:26,880 --> 00:10:27,959 Speaker 2: this and. 185 00:10:27,920 --> 00:10:32,400 Speaker 6: Then that means investing in innovative ways to diversify your 186 00:10:32,440 --> 00:10:37,199 Speaker 6: supply chains. Across maybe different materials or different suppliers, so 187 00:10:37,240 --> 00:10:40,520 Speaker 6: that you have control over those supply and shipping lines. 188 00:10:41,400 --> 00:10:43,960 Speaker 2: Who The attacks on commercial vessels in the Red Sea 189 00:10:44,120 --> 00:10:47,160 Speaker 2: are rearranging the ways the world can continue to effectively 190 00:10:47,240 --> 00:10:50,200 Speaker 2: do commerce, and with the conflict showing no signs of 191 00:10:50,240 --> 00:10:54,439 Speaker 2: stopping soon, companies are thinking critically about how to insulate 192 00:10:54,440 --> 00:10:58,320 Speaker 2: their supply chain from the dangers of today's international waters. 193 00:11:02,920 --> 00:11:05,520 Speaker 2: Thanks for listening to the Big Take from Bloomberg News. 194 00:11:05,800 --> 00:11:09,679 Speaker 2: I'm Sarah Holder. This episode was produced by Alex Suguia. 195 00:11:10,000 --> 00:11:13,120 Speaker 2: It was edited by Ben Holland and Naomi Shaven. It 196 00:11:13,200 --> 00:11:17,199 Speaker 2: was mixed by Blake Maples. Our senior producers are Naomi 197 00:11:17,200 --> 00:11:20,720 Speaker 2: Shaven and Jilda Di Carley. We get editorial direction from 198 00:11:20,720 --> 00:11:24,960 Speaker 2: Elizabeth Ponso. Sage Bauman is our executive producer and head 199 00:11:24,960 --> 00:11:28,920 Speaker 2: of podcasts. Thanks for tuning in. We'll be back tomorrow.