The United Nations has raised the alarm over “escalating disruptions” to global trade due to geopolitical tensions and climate change affecting the world’s key trade routes.
The UN Conference on Trade and Development (UNCTAD) said in a statement that it is profoundly concerned about the escalating disruptions in global trade, particularly due to shipping volatility in the Black Sea, attacks on commercial vessels in the Red Sea affecting the Suez Canal, and the current drought affecting the Panama Canal.
UNCTAD said maritime transport plays a “critical role” as the backbone of international trade, responsible for over 80% of the global movement of goods.
“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.”
UNCTAD estimates that the weekly transits going through the Suez Canal decreased by 42% over the last two months,” UNCTAD said.
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% 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,” UNCTAD said.
“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% compared to a year ago, with container-carrying capacity, tanker transits, and gas carriers experiencing significant declines.”
In addition, the surge in the average container spot freight rates during the last week of December, of $500 dollars in one week, was the highest-ever weekly increase.
Average container shipping spot rates from Shanghai last week were also up by 122% compared to early December. The rates from Shanghai to Europe went up by 256%, while rates to the United States West Coast also increased above average by 162%, although they do not go through the Suez Canal.
“The cumulative effect of these disruptions translates into extended cargo travel distances, escalating trade costs, and a surge in greenhouse gas emissions from ships having to travel greater distances and at greater speed,” UNCTAD said.
“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.”
UNCTAD said the economic implications of the disruptions are far-reaching as prolonged interruptions, particularly in container shipping, pose a direct threat to global supply chains, potentially leading to delayed deliveries and heightened costs.
“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,” UNCTAD said.
