Shipping route disruptions impacting global trade – Unctad
DISRUPTIONS in key shipping routes in the Red Sea, Black Sea and Panama Canal have affected the global trade landscape, the UN Conference on Trade and Development (Unctad) said.
Geopolitical tensions, climate-related challenges, and targeted attacks on shipping vessels have collectively contributed to a significant decrease in transit through critical maritime channels, triggering ripple effects across various sectors.
Unctad released the report “Navigating Troubled Waters. The Impact to Global Trade of Disruption of Shipping Routes in the Red Sea, The Black Sea and the Panama Canal.” Among the affected routes is the Red Sea, where maritime trade pathways via the Suez Canal have encountered severe disruptions. These disturbances are exacerbated by ongoing conflicts in regions such as Ukraine, which have prompted shifts in trade routes for vital commodities like oil and grain.
Similarly, the Panama Canal, a crucial link between the Atlantic and Pacific Oceans, faces a looming crisis due to dwindling water levels. This environmental challenge raises concerns regarding the long-term resilience of global supply chains, highlighting the vulnerability of the world’s trade infrastructure to climate change-induced events.
Unctad’s analysis reveals statistics regarding the decline in transit volumes through these key waterways. Transits through the Suez Canal, for instance, have decreased by a staggering 42 percent compared to peak levels, with weekly container ship transits plummeting by 67 percent. Similarly, total transits through the Panama Canal have witnessed a 49 percent drop from their peak, underscoring the magnitude of the challenge facing global trade.
The decision to reroute ships around the Cape of Good Hope in response to the Suez Canal closure has imposed significant additional costs on shipping companies.
Lengthier travel distances, heightened trade expenses, and increased greenhouse gas emissions are among the consequences of such measures, exacerbating existing challenges, particularly for developing economies.
Moreover, the surge in freight rates since November 2023 has further compounded the strain on global trade. This unprecedented increase, amounting to $500 weekly on average, has immediate implications for consumers, especially in regions like Europe, where higher freight rates and energy prices are expected to drive inflation and impact household budgets.
Unctad underscores “the potential far-reaching economic implications of prolonged disruptions in container shipping, threatening global supply chains and potentially delaying deliveries, causing higher costs and inflation. The full impact of higher freight rates will be felt by consumers within a year.”
The disruptions also pose significant risks to global food security, with interruptions in grain shipments from key producers like Europe, Russia, and Ukraine. These disruptions not only affect consumers worldwide but also exert downward pressure on producer prices, exacerbating the challenges faced by agricultural communities.
The shipping industry has implemented measures such as reduced vessel speeds to mitigate fuel costs and greenhouse gas emissions. However, the escalating disruptions in critical trade routes necessitate urgent action and robust international cooperation to navigate the rapidly evolving global trade landscape.
Unctad emphasized the swift adaptations within the shipping industry and collective efforts to address the geopolitical and climate-related challenges facing global trade. The report underscores the need for sustainable solutions that prioritize the resilience of supply chains and support vulnerable economies in weathering future shocks.