Climate and conflict collide on the high seas: UN warns of soaring costs and delays

United Nations

The UN Conference on Trade and Development (UNCTAD) has released a new study which reveals that trade through the Suez Canal has decreased by 42% in the past two months.

This is due to major players in the shipping industry temporarily suspending Suez transits, resulting in a 67% decrease in weekly container ship transits and significant declines in container carrying capacity, tanker transits, and gas carriers.

The decrease in trade through the Panama Canal is also significant, with a 49% drop compared to its peak. This is attributed to dwindling water levels caused by a severe drought induced by climate change.

The conflict between Houthi rebels in Yemen and the US-led coalition has also affected trade through the Suez Canal, with Houthi attacks on ships and airstrikes by the coalition. The Panama Canal is particularly important for trade between countries on the west coast of South America and for links between Asia and the western United States.

Vulnerable populations, especially in landlocked and developing countries, will be most affected by the disruption of these key trade routes. This could lead to increased living costs and reduced access to essential items.

Ships are now seeking alternative routes, resulting in longer cargo travel distances, higher costs, and increased greenhouse gas emissions. This is a significant change from the shipping industry’s previous efforts to reduce fuel costs and carbon footprint by adopting reduced speeds over the past decade.

The interplay of conflict and climate shocks has led to ships being authorized to speed up, resulting in higher fuel consumption and emissions. For example, avoiding the Suez Canal/Red Sea route on a Singapore-Rotterdam round trip could increase greenhouse gas emissions by up to 70%.

The disruptions in container shipping have far-reaching economic implications, threatening global supply chains and potentially causing delays, higher costs, and inflation. The discontinuation of gas transits is directly impacting energy supplies and prices, and global food prices are also expected to be affected by higher freight costs.

As a result of these disruptions, there has been a shift in transport patterns, with an increase in demand for rail transport services between the coasts in the United States. Major Pacific ports are now using rail routes instead of sea routes, which are more costly and unreliable.

There have also been changes in the trading of commodities, with grain shipments to Egypt now being sourced from Brazil or the US instead of Ukraine, and Russian oil shipments increasingly focused on India and China instead of Europe.

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Mark Silaev
Glosema Account Manager