UNCTAD: Russia Ukraine conflict pushes up global shipping costs and inhibits trade growth
On June 28, the United Nations Conference on Trade and development (UNCTAD) released the report "maritime trade disruption: the Russia Ukraine conflict and its impact on maritime trade logistics", which pointed out that the Russia Ukraine conflict is restraining trade and logistics in Ukraine and the Black Sea region, and increasing global ship demand and shipping costs; As a result, global container shipping and global value chains were disrupted, Ukraine's trading partners had to import goods from other countries, and many countries were forced to look further afield for oil, natural gas and food suppliers.
The report said that in view of the dominant positions of Russia and Ukraine in the global agricultural market and their relationship with food security and poverty reduction, the food security problems caused by the conflict between Russia and Ukraine are of particular concern. The report attributed the shipping and transportation obstacles in the Black Sea region to factors such as regional logistics interruption, Ukrainian port business interruption, destruction of important infrastructure, trade restrictions, increased insurance costs and rising fuel prices. The increase in transportation distance leads to a corresponding increase in transportation time and costs, while the soaring transportation costs and food losses caused by long-distance transportation drive up food prices. Since 2020, food prices and shipping costs have been rising, and the conflict between Russia and Ukraine has exacerbated this situation. From February to may 2022, the transportation price of dry bulk cargoes such as grains increased by nearly 60%. It is estimated that the rise in food prices and freight will lead to a 3.7% rise in food prices for global consumers. The report warns that the interruption of food supply may lead to a decline in food production and rising prices, which will have serious consequences for global food security, especially for fragile and food import dependent economies.
The report analyzes the soaring energy prices caused by the conflict between Russia and Ukraine and its consequences. Fuel and fertilizer are key inputs to global agriculture, while Russia is a giant in the global fuel and fertilizer market and one of the major exporters of oil and natural gas. The soaring energy prices caused by the conflict between Russia and Ukraine endanger global agriculture and food production and supply. Due to trade restrictions and logistics challenges, all participants in the shipping industry need to seek other sources of energy supply in more distant places, which increases the cost of oil and natural gas for shipping, and the rising energy prices exacerbate the transportation cost challenges faced by shipping shippers. Higher energy costs have also led to higher offshore fuel prices, raising shipping costs in all maritime transport sectors. Generally speaking, the increase of various costs means that the price of consumer goods will rise and may widen the gap between the rich and the poor.
The report calls on all parties to take urgent actions and implement corresponding policies and measures to maintain the smooth flow of Global trade. The first is to open Ukrainian ports to international shipping, so that the country's grain can enter the overseas market at a lower transportation cost. Continued cooperation between flag States, port States and other players in the shipping industry is needed to maintain all necessary services, which will help minimize negative impacts on costs, insurance premiums and operations. Second, we must seek alternative means of transportation and relax restrictions on the movement of transit and transport workers, so as to reduce the pressure of cross-border trade. The third is to invest more in transport services and trade and transit facilitation. Fourth, given that the conflict between Russia and Ukraine has exacerbated the development challenges brought by the COVID-19 and the climate crisis, the international community should give more support to developing countries, especially the most vulnerable economies.
Source:Economic Daily
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