The United Nations Conference on Trade and Development (UNCTAD) has expressed profound concerns over the escalating disruptions in global trade, particularly stemming geopolitical tensions affecting shipping in the Black Sea, recent attacks on shipping in the Red Sea affecting the Suez Canal and the impact of climate change on the Panama Canal.
UNCTAD underscores the critical role maritime transport plays 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.
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.
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.
The surge in the average container spot freight rates during the last week of December, by plus 500 dollars, in one week, was the highest ever weekly increase. Average container shipping spot rates from Shanghai this week are up by 122% compared to early December. i.e. have more than doubled. The rates from Shanghai to Europe went up by 256%, i.e. more than tripled. Rates to the United States West coast also increased above average, although they do not go through Suez. They increased by 162%. Here we see the global impact of the crisis, as ships are seeking alternative routes, avoiding the Suez and the Panama Canal.
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.
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.
UNCTAD is the UN trade and development body. It supports developing countries to access the benefits of a globalized economy more fairly and effectively and equips them to deal with the potential drawbacks of greater economic integration.