Supervisor Elham AbolFateh
Editor in Chief Mohamed Wadie

UNCTAD Sounds Alarm over Escalating Desruptions in Global Trade

Sat 27 Jan 2024 | 12:03 AM
Taarek Refaat

United Nations Conference on Trade and Development (UNCTAD) expressed its deep concern about the escalating disruptions in global trade, especially due to geopolitical tensions affecting shipping in the Black Sea and the recent attacks on shipping in the Red Sea, which affected global trade, and affected the Suez Canal, in addition to the impact of climate change on the Panama Canal.

In a report issued, Friday, from its headquarters in Geneva, the organization stressed the crucial role that maritime transport contributes to as the backbone of international trade, especially since it is responsible for more than 80% of the global movement of goods.

The international organization said that the recent attacks on shipping in the Red Sea, in addition to the existing geopolitical and climate-related challenges, have led to the emergence of a complex crisis affecting major global trade routes, and pointed out that its estimates indicate that weekly transit traffic through the Suez Canal has decreased by 42% during the past two months.

The conflict in Ukraine has led to major shifts in oil and grain trade, reshaping established trade patterns, the report said, adding that at the same time the Panama Canal - a pivotal conduit for global trade - is suffering from low water levels, leading to a staggering 36% decline in total transit during the past month compared to last year.

The report pointed out that the long-term effects of climate change on the canal’s capacity raise concerns about permanent impacts on global supply chains.

The report added that the crisis in the Red Sea, which was characterized by attacks led by the Houthis that disrupted shipping routes, added another layer of complexity, especially with the response of major players in the shipping industry by temporarily suspending Suez crossings. The report said that weekly container ship crossings decreased by 67% compared to the past year, with a significant decrease in the carrying capacity of containers, transit tankers and gas tankers.

The report stated that the increase in the average spot shipping rates for containers during the last week of December was more than $500 in one week, and indicated that this is the highest weekly increase ever, adding that the average spot rates for container shipping from Shanghai rose this week by 122% compared to early December, more than doubled.

Rates from Shanghai to Europe rose by 256%, more than tripling, while rates to the West Coast of the United States rose above average, even though they do not pass through Suez Canal and rose by 162%, confirming the global impact of the crisis as ships search for alternative routes.

The report said that avoiding the Suez Canal and the Panama Canal requires more shipping days, which leads to increased expenses, and pointed out that the daily price of shipping and insurance premiums has increased, which has exacerbated the overall cost of transit, in addition to ships having to travel faster to compensate for transfers and burning more fuel per mile and emits more carbon dioxide, further exacerbating environmental concerns.

UNCTAD emphasized the far-reaching economic effects of these disturbances and said that long interruptions, especially in container shipping, constitute a direct threat to global supply chains, which may lead to delays in deliveries and higher costs.

The organization stated that while current container prices are approximately half of the peak During the Covid crisis, passing on higher shipping rates to consumers takes time, and the full impact is expected to be felt within a year.

The report noted that energy prices are also witnessing a significant rise with the cessation of gas transportation operations, which directly affects energy supplies, especially in Europe. 

The crisis is also reflected in global food prices, as long distances and high shipping prices are likely to lead to increased costs.

The report stated that the interruption of grain shipments from Europe, Russia and Ukraine poses risks to global food security, affecting consumers and reducing prices paid to producers.

UNCTAD stressed that developing countries are particularly vulnerable to these disruptions and stressed the urgent need for rapid adaptations by the shipping industry and strong international cooperation in order to navigate the rapid reshaping of global trade dynamics and called for collective efforts to find sustainable solutions, especially to support countries most vulnerable to these shocks.