Key shipping routes face threats impacting trade, inflation, and food security, UNCTAD reports, urging swift global cooperation.
In a stark revelation, the United Nations Conference on Trade and Development (UNCTAD) has issued a dire warning about unprecedented disruptions in key maritime routes, posing significant risks to global trade, inflation, and security. The recent surge of challenges has cast a shadow over critical waterways, including the Red Sea, Black Sea, and Panama Canal, raising concerns about the resilience of the world’s trade infrastructure.
Recent attacks on commercial vessels navigating the Red Sea have intensified the crisis, particularly impacting shipping through the vital Suez Canal. These incidents, coupled with ongoing geopolitical tensions and climate-related challenges, exacerbate existing vulnerabilities in global trade and supply chains, as highlighted in UNCTAD’s latest report released on February 22, 2024.
The situation in the Red Sea has been further compounded by disruptions in the Black Sea, stemming from the ongoing conflict in Ukraine. The war has resulted in significant shifts in oil and grain trade routes, disrupting established patterns and adding to the complexities facing maritime trade.
Meanwhile, the Panama Canal, a critical artery connecting the Atlantic and Pacific oceans, faces a distinct challenge. Dwindling water levels raise concerns about the long-term sustainability of global supply chains, underscoring the fragility of key trade routes and maritime infrastructure.
UNCTAD’s estimates reveal alarming declines in transits passing through the Suez Canal, plummeting by 42 percent compared to peak levels. Major players in the shipping industry have temporarily suspended Suez transits, leading to a staggering 67 percent decrease in weekly container ship transits. Furthermore, container carrying capacity, tanker transits, and gas carriers have all experienced significant declines, signalling a profound disruption in global maritime trade flows.
Simultaneously, total transits through the Panama Canal have witnessed a sharp decline of 49% compared to peak levels, further amplifying concerns about the robustness of global supply chains.
The consequences of these disruptions are far-reaching, encompassing economic, environmental, and security dimensions. Mounting uncertainties have prompted ships to shun traditional routes, rerouting around the Cape of Good Hope, thereby driving up freight rates and insurance premiums. The resulting longer cargo travel distances not only incur higher trade costs but also contribute to a surge in greenhouse gas emissions as vessels are forced to travel at greater speeds to maintain schedules.
Developing economies, in particular, face heightened vulnerabilities as they grapple with the ramifications of prolonged disruptions. The crisis could potentially impact global food prices, with disruptions to grain shipments posing risks to food security and affecting both consumers and producers.
In addition, the crisis has direct implications for energy supplies and prices, especially in Europe, where practically no liquefied natural gas-carrying vessels are currently using the Suez Canal.
UNCTAD underscores the urgent need for swift adaptations from the shipping industry and robust international cooperation to address the rapid reshaping of global trade. The current challenges underscore the exposure of global trade to geopolitical tensions and climate-related challenges, demanding collective efforts for sustainable solutions, especially in support of countries more vulnerable to these shocks.
(Source: UNCTAD)
