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UNCTAD’s assessment of maritime and trade disruptions – Navigating Troubled Waters

Further to their alarm over global trade disruptions, The UN Conference on Trade and Development (UNCTAD) has released a new report “Navigating Troubled Waters” providing a rapid assessment of how the current series of maritime disruptions are creating unprecedented challenges for global trade.

As we have been seeing these disruptions are not just mere inconveniences but seen as a seismic shift in the way global trade operates, underscoring the vulnerabilities ingrained within international supply chains.

Seaborne transport is responsible for 80% of global goods movement and this mode of transport is currently facing a trifecta of challenges namely, geopolitical tensions, climate-induced anomalies, and the subsequent economic repercussions.

The ripple effects of these disruptions are profound, affecting millions worldwide, particularly in the various regions connected by these trade arteries. The side effects of these disruptions also of course include a shortage of shipping tonnage (vessels) and empty container availability leading to additional charges for customers.

The attacks impacting the Suez Canal are not isolated incidents but part of broader geopolitical tensions that also afflict the Black Sea region, due to the ongoing war in Ukraine which has led to a significant reshuffling of trade routes, notably in the oil and grain trade, which are vital for global food security and energy supplies.

The Panama Canal, a vital trade link between the Atlantic and Pacific Oceans, is grappling with severe droughts, said to be a direct consequence of climate change. This has not only reduced its operational capacity but also raised alarms over the long-term resilience of global supply chains.

UNCTAD’s report underscores the stark reality that global trade is facing namely

  • a 42% decrease in Suez Canal transits from its peak, with a notable decline in container ships and tanker movements.
  • Similarly, the Panama Canal has seen transits plummet by 49%.
  • This decline in canal usage due to various disruptions has led to a scramble for alternative routes, notably around the Cape of Good Hope, exacerbating the economic and environmental costs.

The economic implications are far-reaching including a surge in average container spot freight rates translating directly to increases in consumer prices, intensified inflationary pressures, and strained economies, particularly those of developing nations.

The environmental impact cannot be overstated. The shipping industry which in efforts to mitigate costs and reduce greenhouse gas emissions, has historically been slowing down their ship speeds. However, due to the current disruptions, they are having to increase the speeds to maintain schedules, leading to higher fuel consumption and a significant uptick in emissions.

As per UNCTAD, developing economies such as Ecuador, Djibouti, Kenya, and Sudan find themselves at a particular disadvantage due to these maritime disruptions as they are heavily reliant on these routes to enhance their trade, and face exacerbated economic and logistical challenges.

The current global scenario paints a grim picture of the interconnectedness and fragility of our global trade systems and UNCTAD is calling for swift adaptation by the shipping industry, coupled with robust international cooperation.

This situation is a clarion call for collective action, emphasizing the need for sustainable solutions that can mitigate the impacts of geopolitical tensions and climate change on global trade and maritime.

As we navigate these troubled waters, the question remains: How will the global community respond to these maritime and trade disruptions?

The answer lies not only in addressing the immediate disruptions but also in fortifying our trade infrastructure against future shocks, ensuring a resilient, sustainable, and equitable global trade ecosystem.

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