The United Nations Conference on Trade and Development (UNCTAD) has sounded the alarm regarding the disruption in global trade caused by chaos in the Red Sea shipping route. The crisis, according to UNCTAD, poses significant risks to global food prices, particularly impacting developing nations such as India.
In a statement issued on Friday, UNCTAD warned that the ongoing crisis is affecting global food prices, with longer distances and higher freight rates potentially leading to increased costs. The disruptions in grain shipments from Europe, the Russian Federation, and Ukraine are identified as posing risks to global food security, impacting consumers and reducing prices paid to producers.
This concern holds particular significance for India, which has already been struggling with rising food prices, prompting the government to announce export curbs on essential commodities such as wheat, rice, and sugar.
Jan Hoffmann, head of trade logistics at UNCTAD, emphasized the vulnerability of developing countries to such disruptions and reiterated the organization's commitment to monitoring the evolving situation closely.
Despite current container rates being approximately half of the peak seen during the COVID-19 crisis, UNCTAD warns that it may take time for the higher prices to manifest fully for consumers, with the full impact expected within a year.
The Suez Canal, a vital waterway connecting the Mediterranean Sea to the Red Sea, handled roughly 12% to 15% of global trade in 2023, according to UNCTAD's estimates. However, recent data indicates a significant decrease in trade volume through the canal, with a staggering 42% drop over the last two months.
Highlighting the surge in container shipping spot rates, UNCTAD revealed that rates from Shanghai to Europe have more than tripled since early December, while rates to the west coast of the United States increased substantially as well. Notably, these rate hikes occur even for routes that do not traverse the Suez Canal.
The statement highlights the urgency of addressing the crisis in the Red Sea shipping route to mitigate its adverse effects on global trade and food security, urging coordinated efforts to restore stability to the vital trade artery.
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