Investments needed vs supply chain crisis
THE United Nations Conference on Trade and Development (Unctad) warns that the maritime sector will require significant investments in infrastructure and sustainability to weather future supply chain crises.
Unctad airs the warning in its “Review of Maritime Transport 2022,” an annual comprehensive review of global maritime transport, and calls for increased investment in maritime supply chains to prepare better for future global crises caused by the worsening impact of climate change, man-made calamities and the transition to low-carbon energy.
The supply chain crisis in the last two years has shown that a mismatch between demand and supply of maritime logistics capacity leads to surges in freight rates, congestion and critical interruptions to global value chains.
“We need to learn from the current supply chain crisis and prepare better for future challenges and transitions. This includes enhancing intermodal infrastructure, fleet renewal, and improving port performance and trade facilitation,” Unctad Secretary-General Rebeca Grynspan said.
Urgent investment is needed in maritime transport systems to boost resilience to shocks that disrupt supply chains, fuel inflation and affect the world’s poorest the most, according to the Unctad official.
Unctad said logistics supply constraints combined with a surge in demand for consumer goods and e-commerce pushed container spot freight rates to five times their pre-pandemic levels in 2021, reaching a historical peak in early 2022 and sharply increasing consumer prices.
Likewise, dry bulk freight rates increased due to man-made crises, the war in Ukraine and related economic measures as well as the prolonged Covid-19 pandemic and supply chain disruptions.
An Unctad simulation projects that higher grain prices and dry bulk freight rates can lead to a 1.2 percent increase in consumer food prices, with higher increases in the middle- and low-income countries.
“Higher freight rates have led to surging consumer prices, especially for the most vulnerable. Interrupted supply chains led to lay-offs and food insecurity,” said Shamika Sirimanne, director of Unctad’s technology and logistics division.
Specifically, Unctad calls on countries to judiciously assess changes in shipping demand, develop and upgrade port infrastructure and hinterland connections while involving the private sector. They should also bolster port connectivity, expand storage and warehousing space and capabilities, and minimize labor and equipment shortages.
Many supply chain disruptions can also be eased through trade facilitation, notably through digitalization, which cuts waiting and clearance times in ports and speeds up documentary processes through e-documents and electronic payments.
At the same time, Grynspan highlighted the urgent need to shift to less harmful fuels. “And we must not delay the decarbonization of shipping,” she added.
The Unctad report shows that between 2020 and 2021 total carbon emissions from the world maritime fleet increased by 4.7 percent, with most of the increases coming from container ships, dry bulk and general cargo vessels.
Hence, Unctad also calls for more investment in technical and operational improvements to cut the carbon footprint of maritime transport. These include switching to alternative, low or zero-carbon fuels, optimizing operations, using on-shore electricity when in ports and equipping vessels with energyefficient technology.
The report also calls for a predictable global regulatory framework for investing in decarbonization and increased support for developing countries in the energy transition. It further underlines the urgent need to adapt ports to the impacts of climate change, especially in the most vulnerable nations.
Unctad urges the international community to ensure countries that are most negatively affected by climate change — and have contributed the least to its causes — are not negatively affected by climate mitigation efforts in maritime transport.