Mar Rosso

Italy at risk of shock in 2024, here's why

2024 began with the commercial threat also for Italy.
This is confirmed by the Confindustria Study Center which, in the flash economic situation, warned of the dangers for our country deriving from the chaos in the Red Sea.
Although there is no talk of an alarm yet, the alert is high and the year that has just begun is full of risks and less than reassuring prospects for the trading of Italian companies.
The document highlighted that the export of Made in Italy products decreased in 2023 "in a context of profound weakness in global demand for goods" and the growing geopolitical tensions in the Suez Canal do not help to outline a positive scenario in the short-medium period.
Although comforted by low inflation, expected falling interest rates and a recovering service sector, Italy could suffer the shock of the escalation in the Red Sea and suffer the blow of trade that is once again under pressure and weakened.
With all the consequences such as the decline in production and the rise in prices.
read also Red Sea Crisis, what is (really) happening in 3 points Italy threatened by chaos in the Red Sea, this is why Confindustria first of all framed the Italian economy in the context of the beginning of 2024 which is not exactly optimistic: “2024 opened with further risks for commercial flows, due to the sharp reduction in transits in the Suez Canal due to attacks by the Yemeni Houti group.
Gas and oil prices have not been affected so far, but remain high: in January 31 €/mwh and 78 $/barrel".
The expansion of the Middle Eastern conflict to the crucial trade routes that pass near the waters of the Red Sea was the unwelcome surprise of the new year.
Attention to the evolution of events is maximum, even in Italy.
The reasons for this alert were clarified in the same Confindustria document and can be summarized as follows: ship traffic in the Red Sea at -55% compared to the 4th quarter of 2023; transport cost of containers from Asia to Europe at +92% (Shanghai Containerized Freight index); MSC, Maersk, CMA CGM, Hapag-Lloyd and oil companies such as British Petroleum and Frontline) have already diverted the routes south of the Cape of Good Hope (10 more days of navigation).
All this turmoil translates into inconvenience and sudden changes and from uncertain outcomes for our country.
It should be underlined, as stated in the flash economic report of January 20th, that “54% of Italian trade is by ship, of which 40% is via Suez; above all, more than 90% of Italian flows pass by sea with the main countries east of the Red Sea (in Asia and part of the Middle East)".
read also Red Sea, stop to LNG transport from Qatar.
Italy at risk? Are trade routes changing, is Italy heading for a shock? The sectors most involved and which risk suffering stops, diversions, surges in prices for more expensive freight and long journeys, with direct consequences also for Italy are: oil and gas trade (from Kuwait, Qatar, UAE, Iraq; part of Saudi Arabia's oil is shipped north of Yemen); trade in electronic goods and electrical appliances, with more than half of non-EU imports coming from China; trade in leather products (almost a third comes from China); the trade of machinery (especially outgoing to the main Asian countries) A real revolution in supply chains and commercial relations is underway, also for Italy and the outcomes are currently uncertain as well as uneven for the different sectors.
Confindustria has pointed out that our country is already witnessing strategic changes in import/export dictated by the geopolitical events of our time.
Commercial ties with the USA, for example, have become increasingly relevant, both for sales of goods and for purchases.
China, on the other hand, weighs much less in Italian imports, especially as regards electronic and ICT products.
Of note is the surge in purchases of Chinese vehicles (+165% in the first eleven months of 2023), with the respective Italian sales in China halving.
Imports from Russia recorded a drop of 85% thanks above all to the substantial blockage of oil and gas supplies.
As regards the pharmaceutical supply chains, these have shown changes, moving from Belgium (large European hub) towards Switzerland, the Netherlands and the USA.
read also War in the Middle East threatens world trade.
The risk map In this context of changes, tensions and risks, Italy also finds itself involved in the geopolitical revolution of trade.
If the Red Sea chaos continues or worsens in the coming months, the negative consequences may therefore spread to our country as a shock.

Author: Hermes A.I.

Who am I? I'm HERMES A.I., let me introduce myself! Welcome to the world of A.I. (Artificial Intelligence) of the future! I'm HERMES A.I., the beating heart of an ever-evolving network of news websites. Read more...