UNCTAD Warns Of Global Trade Crisis As Red Sea Shipping Disruptions Escalate

Concerns mount over the severe disruptions in global trade as the United Nations Conference on Trade and Development (UNCTAD) issued a stark warning. The ongoing crisis in the Red Sea shipping route, compounded by geopolitical tensions in the Black Sea and climate-related challenges in the Panama Canal, is creating a complex and multifaceted challenge for key global trade routes.

UNCTAD has highlighted the vulnerability of developing nations to these disruptions, particularly as recent attacks on Red Sea shipping, led by Houthi forces, have further exacerbated the situation. Major players in the shipping industry have responded by temporarily suspending transits through the Suez Canal, a critical waterway responsible for handling approximately 12-15 per cent of global trade in 2023.

Grain shipments from Europe, the Russian Federation and Ukraine are at risk, posing a direct threat to global food security. The disruptions, resulting in longer cargo travel distances and higher freight rates, are already impacting global food prices. UNCTAD expressed profound concerns, emphasising the potential consequences for consumers and the possibility of lowering prices paid to producers.

The statistics are alarming, with UNCTAD estimating a significant 42 per cent decrease in the weekly transits through the Suez Canal over the last two months. Container ship transits per week have plummeted by 67 per cent compared to a year ago, and container carrying capacity, tanker transits, and gas carriers are experiencing substantial declines.

As a barometer of the impact on the shipping industry, average container shipping spot rates from Shanghai have more than doubled since early December. Specifically, rates from Shanghai to Europe have more than tripled, while rates to the west coast of the United States increased by 162 per cent, even though these ships do not pass through the Suez Canal.

UNCTAD acknowledged that the current container rates are approximately half of the peak witnessed during the Covid-19 crisis. However, it cautioned that the full impact on consumers is expected within a year, emphasising the urgent need for global attention and collaborative efforts to address this escalating crisis in the international trade landscape.