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UN: Red Sea attacks trigger 42% plunge in transits amid multiple global challenges

30 January 20243 min reading

Recent Red Sea attacks and the Suez Canal crisis have thrust global trade into uncertainty, warns UNCTAD, the UN's trade and development body. With a 42% drop in global trade over the last two months and a staggering 67% plummet in weekly container ship transits, Jan Hoffmann, UNCTAD's head of trade logistics, emphasizes the urgency for immediate international cooperation to navigate these unprecedented disruptions.

The United Nations Conference on Trade and Development (UNCTAD) has unveiled critical insights into the escalating disruptions to global trade. Jan Hoffmann, UNCTAD's head of trade logistics, sounded the alarm at the UN’s daily press briefing on January 26, highlighting the profound concerns over Red Sea attacks led by Houthis, escalating geopolitical tensions, and the impact of climate change on key trade routes. Hoffmann, emphasizing maritime transport's critical role, reveals that it is responsible for approximately 80% of the global movement of goods.

The ripple effect of the crisis extends to crucial trade routes, with the Suez Canal experiencing a 42% decrease in trade volume over the last two months. Geopolitical tensions in the Black Sea and a severe drought in the Panama Canal compound the situation, necessitating urgent international cooperation. Hoffmann underscores the complexity of the challenges, stating, "Here we see the global impact of the crisis, as ships are seeking alternative routes."

TEMPORARY SUEZ TRANSITS SUSPENSION AND PRICE SURGES

Responding to the Red Sea crisis, major shipping industry players have temporarily suspended Suez transits, resulting in a 67% plummet in weekly container ship transits. Tanker and gas carrier transits are also witnessing significant declines. Shipping prices surge, with an unprecedented $500 increase in average container spot freight rates during the last week of December.

SURGE IN SHIPPING COSTS AND SUPPLY CHAIN RISKS

Concrete figures emerge, revealing that average container shipping spot rates from Shanghai have more than doubled (+122%) since early December. Hoffmann stresses the economic implications, stating, "The current challenges pose a direct threat to global supply chains, risking delayed deliveries and higher costs." Insurance premiums surge, compounding the overall cost of transit.

REROUTED SHIPS AND INCREASED EMISSIONS

Environmental considerations heighten the crisis, as ships rerouted from traditional paths burn more fuel, emitting additional CO2. The urgency for sustainable solutions in the face of climate-related challenges becomes undeniable.

In conclusion, Hoffmann cautions that developing countries are particularly vulnerable to these disruptions. UNCTAD remains vigilant and stresses the need for swift adaptations from the shipping industry and robust international cooperation to navigate the rapid reshaping of global trade dynamics. The current challenges underscore trade's vulnerability to geopolitical tensions and climate-related challenges, demanding collective efforts for sustainable solutions.

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