Disruption of maritime routes causes global maritime trade turmoil, says UN expert

The reduction in Panama Canal transits has notably impacted the United States, its largest user, while also adversely affecting other African nations heavily dependent on the Suez Canal, including Djibouti, Kenya, Tanzania, and Sudan.

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A ship, manned by the Spanish aid organization Open Arms, is seen off the shore of central Gaza Strip, on March 15, 2024. (Photo by Rizek Abdeljawad/Xinhua)

by Catherine Fiankan-Bokonga

The disruption of maritime routes in the Red Sea, Black Sea, and Panama Canal is among the reasons behind global maritime trade turmoil, an expert from the United Nations Conference on Trade and Development (UNCTAD) said.

In a recent interview with Xinhua, Jan Hoffmann, chief of the Trade Logistics Branch at the UNCTAD, shared his insights on the escalating attacks on ships in the Red Sea, disruptions caused by the Ukraine crisis in the Black Sea, and drought-related challenges impacting the Panama Canal.

“This combination of crises has led to a significant decrease in the number of ships transiting through these maritime routes,” said Hoffmann.

“In 2023, around 22 percent of global container trade passed through the Suez Canal, the shortest passage linking Europe to Asia. Today, over 20 percent of ships no longer traverse the Canal,” he said.

“The Suez Canal is a significant source of foreign currency revenues for Egypt,” Hoffmann added.

Regarding the severity of the situation, Hoffmann expressed significant concerns. “The crisis in the Red Sea has the potential to disrupt supply chains of industries such as construction, automotive, chemicals, and machinery, which rely on intermediate imports from the Asia-Pacific region,” Hoffmann said.

“Energy supply, food security, and environmental sustainability may be affected. We are already seeing increases in energy and food prices, which raise inflation risks,” he said.

Since November 2023, there has been a remarkable surge in average spot freight rates for containers, Hoffmann said.

This trend has continued since then. Average spot container transport rates from Shanghai have more than doubled since early December (+122%) and they have tripled to Europe (+256%), according to a UNCTAD study entitled “Navigating Troubled Waters: Impact to Global Trade of Disruption of Shipping Routes in the Red Sea, Black Sea, and Panama Canal.”

The Panama Canal’s extreme drought, exacerbated by the El Nino phenomenon, poses significant concerns. “The situation concerns us more than that of the Suez Canal,” Hoffmann said. “The Panama Canal typically recorded over 13,000 transits per year and accounts for nearly 5 percent of global trade. Over the past two years, due to drought, water levels have been low.”

Countries significantly affected by the reduction in Panama Canal transits include the United States, the largest user of the canal.

The adverse effects extend to other African countries heavily reliant on the Suez Canal for foreign trade, such as Djibouti, Kenya, Tanzania, and Sudan.

Hoffmann underscores the importance of continued monitoring of the evolving consequences of these three crises, which are fundamentally reshaping the landscape of maritime transport and trade. 

Xinhua News Agency

Founded in 1931, Xinhua News Agency is one of the largest news organizations in the world, with over 10,000 employees across the globe. As the main source of news and information for China, Xinhua plays a key role in shaping the country's media landscape and communicating its perspectives to the world. The agency produces a wide range of content, including text news articles, photos, videos, and social media posts, in both Chinese and English, and its reports are widely used by media organizations around the world. Xinhua also operates several international bureaus, including in key capitals like Washington, D.C., Moscow, and London, to provide in-depth coverage of global events.

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