The recent attacks on Red Sea shipping coupled with existing
geopolitical and climate-related challenges are reshaping global trade routes
with the potential for major economic and environmental implications. This is according to a new report from the
United Nations Conference on Trade and Development (UNCTAD), titled “Navigating
Troubled Waters. The Impact on Global Trade of Disruption of Shipping
Routes in the Red Sea, The Black Sea and the Panama Canal”.
Maritime trade routes through the Suez Canal have become seriously
disrupted due to recent Houthi attacks in the Red Sea, impacting the global trade landscape. This issue
is aggravated by ongoing disruptions in the Black Sea due to the war in Ukraine, which have altered
traditional oil and grain trade routes.
Compounding these issues is another challenge: the
Panama Canal, a vital link between the Atlantic and Pacific Oceans, is
facing dwindling water levels. Combined, these almost unprecedented situations
have raised concerns about the long-term resilience of global supply chains,
highlighting the vulnerability of the world’s trade infrastructure.
The report reveals that Suez Canal transits have decreased by 42%
compared to their peak volume. Major players in the shipping industry have
temporarily suspended Suez transits, leading to a 67% fall in weekly
containership transits. Likewise, the Panama Canal has seen a 49% drop in total
transits compared to its peak as the Panama Canal Authority continues to
throttle daily transits in an effort to conserve water.
These disruptions are causing both economic and environmental costs,
particularly impacting developing economies... Ships are now avoiding the Suez and Panama Canals, which translates
into longer cargo travel distances, rising trade costs, and increased insurance
premiums. Moreover, greenhouse gas emissions are also growing due to the
greater distances and speeds necessary to compensate for these detours.
UNCTAD warns of the potential far-reaching economic implications of
these disruptions. Prolonged interruptions in container shipping threaten
global supply chains and could delay deliveries, leading to higher costs and
inflation. Additionally, energy prices are surging as gas transits are
discontinued, directly impacting energy supplies and prices, and potentially
global food prices.
The report also highlights the environmental impact of these
disruptions. The shipping industry has been reducing speeds for over a decade
to lower fuel costs and address greenhouse gas emissions. However, disruptions in key trade routes are leading to increased
vessel speeds, which result in higher fuel consumption and greenhouse gas
emissions. The increased fuel consumption could lead to a 70% rise in
greenhouse gas emissions for a Singapore-Rotterdam round trip.
UNCTAD underscores that developing countries are particularly vulnerable
to these disruptions. The organization is calling for swift adaptations from
the shipping industry and robust international cooperation to manage the rapid
reshaping of global trade, emphasizing the urgent need for sustainable
solutions in support of countries more vulnerable to these shocks.