We are honored to share the UNCTAD report on the Interruption of maritime trade due to the war in Ukraine and its effects. A war in Ukraine is stifling trade and logistics in Ukraine and the Black Sea region. The search for alternative trade routes for Ukrainian products has rapidly increased the demand for land and sea transport infrastructure and services.
For Ukraine’s trading partners, many staples now have to be sourced from further afield. This has increased the global demand for ships and the cost of shipping around the world.
Cereals are of particular concern given the leading role of the Russian Federation and Ukraine in agri-food markets and their link to food security and poverty reduction.
Grain prices and shipping costs have been on the rise since 2020, but the war in Ukraine has exacerbated this trend and reversed a temporary drop in shipping prices. Between February and May 2022, the price paid for the transport of dry bulk goods – such as grains – increased by almost 60 percent. The concomitant rise in grain prices and freight rates would lead to a nearly 4 percent rise in global consumer food prices. Nearly half of this impact is due to higher shipping costs.
The Russian Federation is a giant in the world market for fuels and fertilizers, which are key inputs for farmers around the world. Disruptions in its supply can lead to lower grain yields and higher prices, with serious consequences for global food security, particularly in vulnerable and food-import-dependent economies.
The Russian Federation is also a leading exporter of oil and gas. In the face of trade restrictions and logistical challenges, the cost of oil and gas has risen as alternative sources of supply are turned to, often in more distant locations.
Higher energy costs have led to higher marine fuel prices, increasing shipping costs for all sectors. At the end of May 2022, the world average price of very low sulfur fuel oil (VLSFO) had increased by 64% compared to the beginning of the year.
Taken together, these higher costs imply higher prices for consumers and threaten to widen the poverty gap.
World trade depends on a complex system of ports and ships that connect the world. For world trade to flow smoothly, it must be ensured that Ukrainian ports are open to international shipping and collaboration between transport stakeholders continues to provide services. Alternative forms of transportation should also be sought. And investment in transport and trade facilitation should be encouraged, as well as support for the most vulnerable economies.
To see the full report, click on the following link:
Source: UNCTAD
