When we buy a new mobile from the market, buy domestic oil or fill petrol in our vehicles, we never think about how these things reach us. The reality is that the real backbone of business around the world is ocean-going cargo ships. When everything goes smoothly, no one notices. But as soon as a ship gets stranded at any port, the whole world is in an uproar.

Mirto Kalopsidi, Professor of International Economics at Harvard University, says that at least 80 percent of the world’s trade is done by sea. However, this area remained hidden from the eyes of the world for a long time. According to Professor Kalopsidi’s research, when the ocean freight system breaks down, its fluctuations prove to be faster and more dangerous than any stock market. Even a small blockage in the sea creates a huge fire of global inflation.

Queues at ports, thus creating a major hazard

If we want to understand the ocean business, it can be seen like the billing counter of a busy supermarket. When there is a sudden increase in crowd at the supermarket, the checkout line starts to get long very quickly. A similar situation occurs at the ports as well.

Sending goods from one country to another has to go through several stages. First of all the exporter has to find a vessel to carry the goods. After this the ship reaches the port, where the cargo is unloaded. Each port has its own fixed capacity. A limited number of cranes, workers and machines work there. If the number of ships at a port suddenly increases, the queue becomes so long that it becomes very difficult to manage.

While the port is already struggling with congestion, even a slight increase in demand could send the situation spiraling out of control. Ships have to wait for weeks to dock. This reduces the capacity of the entire network and multiplies the cost of delivering goods.

Red Sea, Hormuz, war tensions raised rents

The sea lanes spread all over the world are so interconnected that any movement in one corner shakes the whole world. The current red sea crisis is the biggest example. Fear of attack forces ships to abandon the short route of the Suez Canal and take a long detour via the ‘Cape of Good Hope’ in Africa.

Due to this long route the ships are taking a long time to complete the journey. Due to which ships can sail less. Due to which the availability of vessels at sea has decreased and the freight rates have suddenly gone up. A similar pressure was seen during the Corona pandemic, when the entire system collapsed completely.

On the other hand, the tension in the Strait of Hormuz is directly affecting important ports for the movement of crude oil. Similarly, the war between Russia and Ukraine dealt a deep blow to the grain supply. The closure of major ports in Ukraine forced ships to divert to ports in Romania. Even after the rerouting, the efficiency of the entire network decreased, causing prices of daily commodities to rise sharply.

Calculation of 40 percent empty ships at sea

A shocking truth about maritime trade is that about 40 percent of ships travel completely empty. Professor Kalopsidi’s research through satellite tracking of ships (AIS data) has made this major revelation.

This may seem strange at first glance, but a huge imbalance in world trade is responsible for this. For example, container ships going from China to America are fully loaded with goods. These are filled with clothes, shoes and electronic gadgets. But when those same ships return to China from America, they are almost empty. Only cheap goods such as scrap metal or grass are shipped from the US to China, which take up very little space.

A similar situation is seen in the case of raw materials. Rapidly developing India and China require large quantities of raw materials to build roads, factories and buildings. Both countries are the largest buyers of coal, pig iron and bauxite. While countries like Australia and Brazil are their big exporters. When a ship brings raw materials from Australia to India or China, after unloading, it simply has to go to another port to bring in new cargo. This imbalance is greater in the crude oil market, as the sellers are a few countries and the buyers are the whole world.

The dominance of Asian countries is increasing

The history of the shipbuilding industry has also changed completely over time. About 150 years ago Britain and other European countries were at the forefront of shipbuilding. During the world wars, America became the main center of this field, but later it dropped out of the race.

After World War II, Japan achieved first place in the world by supporting heavy industries. Later, South Korea overtook Japan and after 2000, China took over the world based on strong policies. Professor Kalopsidi believes that Europe will almost disappear from the industry in the next 10 years, with Japan remaining a very small player, while China will remain at the top. India’s market share in this race is also gradually increasing.

Along with this, the changing nature of weather has also posed a serious threat to maritime business. Frequent severe storms obstruct the passage of ships and suspend port operations. Due to the drought in the Panama Canal, the movement of ships has been strictly controlled. The potential for damage to coastal infrastructure due to sea level rise is increasing. Work is underway to reduce pollution from ships, reduce sulfur emissions and new fuel standards, which will completely change the cost of freight transport in the future.

These giant ships plying the seas may be out of sight, but they determine their impact on our pockets. Until this complex network of vessels and its vulnerabilities are seriously understood, it will not be easy to protect the world from sudden inflation shocks.