Global shipping threatened by Houthi military advances

0:00This BBC podcast is supported by ads outside the UK. Russia is building its influence in Africa, and it's not just about its military presence. It's opening more cultural centres where Africans can go to learn the language, culture, even study in Russia. So what's in it for Russia and how interested are Africans in learning Russian? More young people in Africa, the ones that are opportunity to see the world beyond Africa as it is. That is why the most time is in Lendur, Jalandwitch. I'm Hannah Gelbad, come join us on What in the World and award winning daily podcast from the BBC World's Airness. You can listen wherever you get to your BBC podcasts.

1:00Another key shipping route is under threat and oil prices are feeling it. It means that about they just got worse. There are fewer ships that are prepared to go into these high risk areas to load cargoes. It's world business reports from the BBC World Service. I'm Vashala St. Patma. On the way, the Hootsies have expanded their control in the Red Sea, unsettling one of the world's busiest trade routes. Inflation in the US refuses to budge, but will meet a Boston business owner is defying the trend. And a quarter of a century after 9-11, we ask how Wall Street was changed forever. So we begin in Yemen where the Iran-Bat Hoothies have tightened their grip on the country's Red Sea coast. Now they control the Babal Mandevs straighter, narrow stretch of water

2:03that sits at the entrance to the Red Sea and carries a huge amount of global trade. If you're shipping goods between Europe and Asia, this is one of the most important routes in the world. So what happens when that route comes under threat? Or Peter Sand is a chief analyst at Freight Intelligence Company, Zanata. It means that a bad day just got worse since the late 2023, the Hoothies are basically scared away half of international maritime activity through that area. And the most recent flare up with the fighting against the Saudis is just making this area even more dangerous than it already was. What does that mean for shipping routes? So if you are expecting cargo that's coming through that route, we've heard from the Hoothies that have said that it's not going to affect shipping. But do we know that to be true? I wouldn't at least assess my risk assessment on the basis of communication

3:04from any parties involving in war, being the Hoothies, the Saudis, the Serenians or the Americans. So what this means for cargo owners is that if you were having cargo on board your container ship, that you expected to go through that area, they some still do, even though the majority go round the cable good hope, you may all of a sudden find that cargo to go round the cable good hope and add some 10 to 14 days of transit time. So so goods critical maybe to your supply chain, your sender line, your manufacturing, it could be, well, waiting for you. What are businesses doing? What kind of decisions are having to make because of what is going on with the Hoothies and the Red Sea and that quite crucial port of Mocha? I think you need to see this not in isolation, but in context with the wider Middle East situation right now. So one nation being particularly hit from the close trade of Hormuz when it comes to

4:09imports of containerized goods as well as exports of crude oil and liquefied natural gas, to some extent is the Saudi Arabia. So the fact that the Hoothies may now stop shipping to go in and out of Red Sea to call the port of Tyra or Yenbu for that matter is really a curveball on the Saudis. So obviously they cannot accept a closure of Babylon and because that will cut off a clear say R3 for goods flowing in and out of Saudi Arabia that is now even more important than it was before with the closure of Hormuz. So that was Peter Sand, chief analyst at freight intelligence companies, Zanetta explaining what's going on with shipping. Well the military threat of the Hoothies means that the safety for ships and crews will be a key issue for the industry. Michelle Weiss-Bokman is a maritime intelligence analyst with Windward.

5:10Well the Hoothies have really had an outsized influence on this global shipping choke point since 2023 and now obviously with the additional threat to the Saudi oil at a time when the Strait of Hormuz is also partially closed. This really does raise risk and make getting oil to key markets much more difficult. Saudi oil that is going to either China or to Pakistan has really got a free pass from the Hoothies and it has been allowed to go through Babylon and Deb uninterrupted as well as Russian oil that's been going from the Baltic and the Black seas to India and China. So the targeting is quite specific but what we have learnt from the past years is that Hoothies messaging to the world is inconsistent and inaccurate and very curial. So even when a vessel from the same fleet has previously called it Israel for example,

6:11they're still viewed as a as a hoothy target. So there is considerable risk for many ships to to be going through into the Red Sea. So effectively too risky and so they end up diverting around other routes through the the Cape of Good Hope and that's clearly costly as well that then adds to the cost and then presumably delays that feed through to businesses and consumers. Indeed and especially when it comes to the freight market for tankers for example rates are at hundreds of thousands of dollars a day because the tankers are being diverted the voyages are taking longer and there are fewer ships available and also because of the risk there are fewer ships that are prepared to go into these high risk areas to load cargoes. And what would actually make the Red Sea secure again is there something that could happen realistically to achieve that? Well the Hoothies have learnt that they can have an outsized influence on global shipping not by actually attacking

7:12vessels but by the mere threat of attacking vessels. That means that not all vessels have the safety or the security guarantees that they feel they need to to transit. And this has been in place really for for several years. Most Western affiliated especially US affiliated vessels are certainly not going to go into the area now knowing then in the Strait of Hormuz US forces have attacked Iranian tankers for example in in the last couple of days. So a resolution to the situation in the Strait of Hormuz is probably going to lead to a resolution here in the Red Sea. And in the medium term we're going into autumn now, Christmas is round the corner and clearly that's a key time for retailers. What does this mean for businesses in the next few months? Well when it comes to container ice shipping container ice shipping going from Asia to Europe for example some of the container lines were flirting with resuming transits through the Red Sea and the sewers can out in order to

8:16avoid having to divert around the Cape of Good Hope as many have been doing for a couple of years but they're likely now to reassess that. And again that's additional costs perhaps in an extra 14 days maybe another one million dollars in fuel loyal cost depending on the size of the vessel. So of course this is all feeding into global inflation and the pressure on the global economy. So let's check in now with the financial markets with us. It's Chris Lo chief economist at FHN Financial in New York. Hi Chris. Hi. So Chris lots to digest there's so much going on and we also heard in the news that Saudi Arabia has closed its east-west oil pipeline in the last few hours as a result of the Houthi military action as well. That's right so it's an escalating threat in terms of oil prices, oil supply. And I think too there was news from the International Energy

9:18Agency which released their monthly publication just last night. They do an analysis of global oil markets supply, demand shipping, etc. And one of the things we're learning from that is that the demand for oil has actually tumbled over the course of the last seven months. So the impact is not just on price. While inflation is the big issue in Europe and in the US, in fact in Asia particularly the smaller manufacturing dominated Asian economies it's the inability to get oil and therefore the impact on manufacturing and industrial production that is actually much bigger in those places. Okay Chris stay with us because we're going to be talking about inflation now. Clearly they're closely linked to oil. Emplation figures show that prices in the US rose 3.4%

10:23in the year to August unchanged from the previous month but it means that year on year real earnings are down by 0.3% while Samaritan is our North America business correspondent. US inflation was still running hot in the month of August and energy prices were a big driver of that. Diesel has hit record highs in the price of gasoline while not breaking records it's still really very expensive. Now if you cut away volatile things like food and energy the consumer price index was up 0.3% in the month. Now although this is not the Federal Reserve's preferred gauge of inflation it is certainly something that the US Central Bank will be taking into consideration at its meeting next week and it seems increasingly likely that the Fed will have to raise interest rates and if you look at financial markets well they certainly think that that's the case with traders in the Federal Fund's futures markets putting the odds of a rate hike at 90%.

11:24So high inflation comes as rising oil prices pushes US diesel above $6 per gallon for the first time ever. Jamie Hagen is president and owner of Hellbent Express, a family owned trucking company in South Dakota. He told me about how businesses. We're buying newer equipment and kind of investing thinking that this was going to be the way like the economy was just going to start in Haman. Things were going to start going moving quickly and reinvestment in the United States like bringing business back and all these things because of this and now everybody's paused literally like it just like somebody turned the faucet off and the calls aren't coming in the the freight is slowing down drastically quickly because just there's just no money left for it. You know people aren't buying things and shippers aren't building things and you know that's what's catching everybody more than anything is just the cooling of the entire economy. So that's

12:27what's making me more nervous than anything as long as trucks are still moving you can make money. It's when they stop moving that's when things get expensive quickly. So that was Jamie Hagen who owns a family owned trucking company in South Dakota and not everybody is feeling the pinch is hard though. I've been speaking to Richard Canerillo who runs a bone town burger company in Boston, Massachusetts and I asked him how business was going. This summer has been amazing. It's been crazy to the point of sheer exhaustion. You know we keep laughing like oh we can't book anything we can't book anything. Yep hold my bear because here comes two more jobs and we're going to take them on anyway. That's really great to hear because we've heard about prices rising in the US. Inflation is ticking up. It's great the businesses like yours are still thriving. Yep we're doing all right. And how do you plan for this your raw materials your goods that you use to make your food. Does that tend to be more expensive now because of what's happened in the last eight to nine months?

13:28Definitely ground beef itself usually you know has skyrocketed in the past nine to 12 months or an hour to five dollars in 56 cents per pound you know that's a big jump from at least a year ago. And how do you count for that what happens where does that cost go? Right now unfortunately we're kind of eating that costs because we're very apprehensive about raising prices because it does scare people off you know people see food trucks as a frivolity you know it's not something they have to have we don't want to scare anybody off so right now we're kind of just dealing with it. So beef is obviously the headline cost but what else has been noticeably more expensive for you like buns, cheese, packaging for example. Buns have definitely gone up in the past year. Cheese has been going up bacon has skyrocketed bacon I'm paying double than what I was two years ago. Pretty much everything except for eggs eggs have come way down for some weird odd reason.

14:28So as a business what do you have to do to protect your margins you know put prices up have you or like you just said you didn't want to do that but is there a way that you can counter these price rises. Right now what we're doing is our best to use everything that we already have on hand like a great chef taught me years ago to make a daily special with everything that we already had in house so we don't buy anything differently so we don't spend anymore. So I'm actually fairly good at doing that so that is a good way of using up or something left over from the day before I can turn into something completely different. Besides that we have raised just like little increments on things you know just like drinks you know uh sides of sauce stuff stuff like that we've raised just a little bit but within the next week to two we're going to actually have to raise price on everything. And what are your customers telling you and are you still seeing the same numbers of people buying burgers. It's actually they'd fairly the same if not spiked up a little bit

15:29just in the past month alone we had three or four people like oh my god I can't believe it's only $10 for this very basic burger with lettuce tomato pickle and red onion and cheese and like we make our pickles we don't even buy them and you know we get pickled in cokes and we brine them and all that stuff. So there are maze that you know one of our burgers is only $10 and our most expensive burger is $11 and if these costs stay where they are what does the next year look for your business. Pretty much the same you know we just have to play it pretty close with the pricing of everything you know I can sometimes be fast and loose like with the pricing especially if I'm just creating a special out of thin air I'm like okay I'll make it $10 or $11 just so a coincide with everything else on our menu because I don't want our regular burgers to be $10 or $11 then all of a sudden I have a brand new special that's $17 you know. What's your best seller? What's your what's everyone's favorite burger. Oh you'll love this it's called the Lemmy he was the singer bassist of Motorhead from England. Oh that's great. It's our favorite I think I've

16:35actually 13 years in business I've only needed once. We smoke onions and then we deep fry them and then we have applewood smoked bacon cheddar cheese and a bourbon barbecue sauce because you know Lemmy was a huge jack danos drinker so we make barbecue sauce out of jack danels. That sounds really good. That was Richard Cumberelo who has a burger truck in Boston. Chris Lowe is still with us. Chris are you noticing higher prices when you go about your day? It's everywhere it's absolutely everywhere I think the place I notice it most because I fly so frequently for work. Air fairs are up about 25% from a year ago. It's a massive increase when you consider how expensive it is to fly in the first place and what we're seeing from the airlines not only have they raised their prices but they're also cutting service no drinks on flights under an hour you know food service

17:39even more diminished than it was last year so they're clearly seeing their margins squeezed despite these increases and then of course the big thing my big concern is diesel you mentioned it earlier it is at a record and diesel fuel prices affect food production costs so the cost of everything in the supermarket will go up it affects shipping costs which means the cost of goods in general will go up and none of that diesel price increase is affected is is reflected in the August numbers the September inflation numbers will be bad too. Yeah we're interesting to see what say in just a few weeks time okay Chris stay with us you're with world business report from the BBC World Service. Russia is building its influence in Africa and it's not just about its military presence it's opening more cultural centres where Africans can go to learn the language culture even study in

18:45Russia so what's in it for Russia and how interested are Africans in learning Russian? more young people in Africa they want the opportunity to see the world beyond Africa as it is that is why the most time is in Lendroshland which I'm Hannah Gelbad come join us on what in the world an award-winning daily podcast from the BBC World Service you can listen wherever you get your BBC podcasts. Get more with BBC podcasts wherever you listen be the first to listen to your favorite shows like evil genius good bad billionaire and your dead to me with a subscription to BBC podcasts premium on Apple podcasts you can also enjoy a range of our podcasts add free with an Amazon Music subscription. On today's business daily podcast Wilbane has been taking stock of the week with Ticara Small in Canada and Andy Ula in Texas they've been chatting a matter new documentary on Elizabeth Holmes who's now in prison for the Theranos Medical scandal. Why would I deceive you? There's no there's no reason for me to do that.

19:53Okay so that is some of the atmosphere from it and the sort of stare that she's giving the comedian Elizabeth Holmes this is the founder of Theranos. I cannot understand how why there's so many questions I mean just from in a PR perspective I can't understand how that would help her in any case but I guess every person who goes to see this documentary benefits in some way. And Andy extraordinarily giving she's your here your villain sorry of the the business week she's talking in that documentary too one of the clips that's in there about a comeback Theranos part two I don't see where there was much to part one to come back to but you're exactly right no it's so funny because I was talking to my wife about that too I was like is this is she trying to be a hero am I presenting a of the American gumption? I get more of that on today's business daily's podcast wherever you get your BBC podcast also if you like Elizabeth Theranos or the story around the dropout I recommend by it's a great series a very addictive. So today marks 25

20:59years since the Alcoyote attack on the United States on 9-11 a solemn ceremony was held in New York in remembrance. Thomas F. Therkhoff Jr. Leslie Ann Thomas Brian Thomas Thompson after the attacks we saw the authentic spirit of our nation we were all New Yorkers that day every one of us we were all New Yorkers. So that ceremony took place earlier today and shortly afterwards I spoke to Julie Menon who's the speaker of the New York City Council who had just attended that ceremony when the 9-11 attacks took place Julie ran a restaurant in the area called Vine she believes her mother died of a 9-11 related cancer as a consequence of being in the area.

22:01Now at the time officials encouraged people to return to the area saying the air was clean to breathe. I was trying to find my husband because we lived a couple blocks away from Brown Zero. I owned a restaurant at the time called Vine Restaurant which was also located a few blocks away from Brown Zero and my husband had left that morning for a 9-A and meeting at the World Trade Center site. When I found out what had happened I was frantically trying to find him thankfully he was okay he had moved the location of his meeting and bonnets to me. My mother who lived with us had gone out that morning to a doctor's appointment we couldn't find her to later that afternoon when she came home covered in the white rage ash and she subsequently about a decade ago died of a 9-11 related cancer. My business was absolutely decimated when the towers fell the windows in my restaurant were blown out in the white rage ash was in every inch and previs of my building and then the weeks after 9-A-Leaven I started a not-for-profit organization called Wall Street Rising that was

23:04focused on rebuilding Lower Manhattan and I ended up serving on the jury that selected the Brown Zero Memorial and ended up sharing the local community board which is our most local form of government in the Lower Manhattan neighborhoods for over seven years. We were very sorry to hear about everything that you've had to go through particularly the loss of your mother which missed a bit incredibly hard and upsetting for you as a family and you said that it was 9-11 related illness. Yes she ended up contracting cancer which the doctor said was 9-11 related she got a very rare type of cancer and survived about two years after her initial diagnosis. I'm very sad to see her back and you know like I said it must have been a very hard time for your family. You talked well about your business your restaurant being impacted being effectively destroyed because of 9-A-Leaven and you tried to reopen that to show that you know this sort of terrorism wouldn't defeat New York. That's exactly right so that to me was very important the New York Stock Exchange opened one week after 9-11 and I felt that since my business was right across

24:09the street from the New York Stock Exchange and that all eyes would be on the New York Stock Exchange when they reopened I thought it was very important that they not show a shattered business across the street. So we reopened even that we were in the frozen zone and couldn't get food deliveries and most of my employees couldn't even come in for work. So we went from having about 250 customers for lunch which we used to have before 9-11 to three customers came in that first day and we cooked pasta because we couldn't get food deliveries but symbolically it was important that we reopened and we thought that that was one of the best ways to show that the terrorists had not defeated us. It's interesting that story because clearly a sign of resilience there by yourself to restart your business but clearly there was a huge economic impact in that particular area of Lower Manhattan that perhaps gets a little bit lost when we talk about 9-11. Well that's exactly right I think at the time in the weeks and months after 9-11 most people said people will never live downtown again they're not going to want to work downtown again and we were able to

25:11prove them wrong as I chaired the local community for a down there. We were very focused on keeping residents down town. We helped in the work that I did as head of Wall Street Rising. We helped over 600 small businesses stay in Lower Manhattan and it ended up that Lower Manhattan in years after 9-11 became one of the fastest-scoring residential neighborhoods in the city. We opened three new schools, numerous new cultural organizations, new parks and I think that was so important because it was about renewal and rebuilding and revitalization in the face of the horrors of 9-11. When you talked about reopening the restaurant even though in your deliveries can get through and many staff can return. Clearly a sign of resilience there but do you think there was a lot of pressure for New Yorkers to get back to work and to return to normal quite quickly? Well there was and that's actually become one of the really very sad parts of the post 9-11 legacy which is a federal government or environmental protection agency told us that the air was safe to breathe so all of us who lived

26:16downtown stayed downtown and mother included and air was clearly not safe to breathe. Now over 9,000 people many of them first responders and many downtown residents like my mother have died of 9-11 related cancers. More people have lost their lives in 9-11 related illness than tragically died on that day. That was Julie Menon's speaker of the New York City Council Chris you misremember that day well. I do. I actually was supposed to be in an economics conference in the Vista hotel which was under the twin towers. I wasn't there because I was on a delayed flight the day before but my office too was just a few blocks from the World Trade Center and oddly enough I remember reading the story about people eating pasta at the vine restaurant after 9-11. And you helped afterwards sort of rehabilitate people, help people from the wrong. Well yeah we did. We volunteered my wife

27:22and I to feed meals and you know bring water to the first responders who were working down there. There were hundreds of New Yorkers who volunteered to help huge outpouring. Okay Chris well thank you very much for joining us Chris Leila Chief Economist at FH10 Financial in New York. That's it from World Business Report. You can follow me on my socials. I'm at BBC Mischala SB. Thanks for listening. Russia is building its influence in Africa and it's not just about its military presence. It's opening more cultural centres where Africans can go to learn the language culture even study in Russia. So what's in it for Russia and how interested are Africans in learning more young people in Africa. The ones opportunity to see the world beyond Africa as it is. That is

28:24why the most time is in Lendrosh and Landridge. I'm Hannah Gelbart come join us on What in the World and award winning daily podcast from the BBC World Service. You can listen wherever you get your BBC podcasts. Get more with BBC podcasts wherever you listen. Be the first to listen to your favourite shows like Evil Genius, Good Bad Billionaire and You're Dead To Me with a subscription to BBC Podcasts Premium on Apple Podcasts. You can also enjoy a range of our podcasts ad free with an Amazon Music subscription.