THE UN Conference on Trade and Development (Unctad) said the ongoing Ukraine-Russia war is putting further pressure on global logistics, hiking global vessel demand and exacerbating shipping costs worldwide.
In a report, Unctad explained that Ukraine’s trade partners have been forced to find alternative sources for commodities to avoid shipping and transport hurdles in the Black Sea region caused by the war.
Due to this, Unctad added that shipping distances, transit times, shipping costs, freight insurance costs and fuel prices have increased altogether.
Furthermore, Unctad said fewer grain shipments from Ukraine and Russia are contributing to higher food prices, given that the two countries are big players in the global wheat market.
“Grains are of particular concern given the leading role of the Russian Federation and Ukraine in agrifood markets, and its nexus to food security and poverty reduction,” it said.
“Between February and May 2022, the price paid for the transport of dry bulk goods such as grains increased by nearly 60 percent. The accompanying increase of grain prices and freight rates would lead to a 3.7 percent increase in consumer food prices globally,” it added.
The Unctad pointed out that the disruption of Russian supply of fertilizer and fuel in the global market would lead to lower grain yields and higher prices globally.
“Disruptions in their supply may lead to lower grain yields and higher prices, with serious consequences for global food security, particularly in vulnerable and food-import-dependent economies,” it said.
“Confronted with trade restrictions and logistical challenges, the cost of oil and gas has increased as alternative sources of supply, often at more distant locations, are called upon,” it added.
The Unctad explained that the higher energy costs have resulted in higher marine bunker prices, “raising shipping costs for all maritime transport sectors.” As of end-May, Unctad said the global average price for very low sulphur fuel oil had increased 64 percent year-on-year.
“Taken altogether, these increased costs imply higher prices for consumers and threaten to widen the poverty gap,” it said.
Unctad recommended the urgent reopening of Ukraine ports to international shipping to allow cheaper grains from the country to be sold worldwide at lower shipping costs.
“Continued collaboration is needed among vessel flag states, port states and other actors in the shipping industry to maintain all necessary services, including bunkering supplies, health services for sailors and certification of regulatory compliance,” it said.
“This will help to keep to a minimum the negative impacts on costs, insurance premiums and operations,” it added.
Unctad recommended that alternative ways of transport be pursued, adding that easing transit and movement of transport workers may reduce the “pressure” on cross-border trade and transit.
“Also, Unctad calls for more investment in transport services and trade and transit facilitation,” it said.
“And more international support for developing countries, especially the most vulnerable economies, as the war in Ukraine adds to the challenges posed by the Covid-19 pandemic and the climate crisis,” it added.
Image credits: AP/Efrem Lukatsky