Weekly shipping transits via the Suez Canal decreased by 42% during the last two months, according to the United Nations Conference on Trade and Development (UNCTAD).
UNCTAD has expressed profound concerns over the escalating disruptions in global trade, particularly stemming from geopolitical tensions affecting shipping in the Black Sea, recent attacks on shipping in the Red Sea and the impact of climate change on the Panama Canal.
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. To read insights on its impact on helium supplies, click here.
The ongoing conflict in Ukraine has triggered substantial shifts in oil and grain trades, reshaping established trade patterns. Simultaneously, 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 more than $500 in one week, was the highest ever weekly increase. Average container shipping spot rates from Shanghai this week are up by 122%, more than double, compared with early December, while rates from Shanghai to Europe more than tripled.
Rates to the US West coast also increased above average, although they do not go through Suez, illustrating the global impact of the crisis, as ships seek alternative routes, avoiding the Suez and 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.
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.