Comments
The United Nations Conference on Trade and Development (UNCTAD) has expressed concerns over the escalating disruptions in global trade due to geopolitical tensions affecting shipping in the Black Sea, attacks on ships in the Red Sea affecting the Suez Canal and the impact of climate change on the Panama Canal
The recent attacks on Red Sea shipping, coupled with existing geopolitical and climate-related challenges, have given rise to a complex crisis affecting key global trade routes. Nearly 80 per cent of goods globally are moved via maritime.
UNCTAD, in a statement, estimates that the weekly transits going through the Suez Canal decreased by 42 per cent over the last two months.
The ongoing conflict in Ukraine has triggered substantial shifts in oil and grain trades, reshaping established trade patterns. Simultaneously, the Panama Canal, a pivotal conduit for global trade, is grappling with diminished water levels, resulting in a staggering 36 per cent reduction in total transits over the past month compared to a year ago. The long-term implications of climate change on the canal’s capacity are raising concerns about enduring impacts on global supply chains.
The crisis in the Red Sea, marked by Houthi-led attacks disrupting shipping routes, has added another layer of complexity. Major players in the shipping industry have temporarily suspended Suez transits in response. Notably, container ship transits per week have plummeted by 67 per cent compared to a year ago, with container carrying capacity, tanker transits, and gas carriers experiencing significant declines.
The cumulative effect of these disruptions translates into extended cargo travel distances, escalating trade costs, and a surge in greenhouse gas emissions from shipping having to travel greater distances and at greater speed.
Avoiding the Suez and Panama Canal necessitates more days of shipping, resulting in increased expenses. The price per day of shipping and insurance premiums have surged, compounding the overall cost of transit. Additionally, ships are compelled to travel faster to compensate for detours, burning more fuel per mile and emitting more CO2, further exacerbating environmental concerns, the UNCTAD said.
Global Implications
While current container rates are approximately half of the peak during the Covid crisis, passing on higher freight rates to consumers takes time, with the full impact expected to manifest within a year.
Energy prices are witnessing a surge as gas transits are discontinued, directly impacting energy supplies, especially in Europe. The crisis is also reverberating in global food prices, with longer distances and higher freight rates potentially cascading into increased costs. Disruptions in grain shipments from Europe, Russia, and Ukraine pose risks to global food security, affecting consumers and lowering prices paid to producers.
“Maritime transport is really the lifeline of global trade,” said Jan Hoffmann, UNCTAD Chief of Trade Logistics amid attacks against shipping in the Red Sea.”
Average shipping cost rates from Shanghai have more than doubled since early December 2023, those to Europe over tripled and those to the US west coast also increased “even though they don’t go through the Suez Canal. We are seeing multiple impacts,” he highlighted, warning of rising costs, potential inflation, global delays and disruptions and worsening of climate change contributors.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.