The war in Ukraine has caused serious challenges to the trade and logistics of Ukraine and the Black Sea region, according to a new report of the UN Conference on Trade and Development (UNCTAD), which noted that the search for alternate trade routes for Ukrainian goods has increased the demands on land and maritime transport infrastructure and services.
The war situation has increased global vessel demand and the cost of shipping around the world, according to the report, while grains are of particular concern given the leading role of Russia and Ukraine in agrifood markets.
“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 decline in shipping prices,” pointed out UNCTAD in the report, which showed that between February and May 2022, the price paid for the transport of dry bulk goods- such as grains- increased by nearly 60%.
The concomitant increase in grain prices and freight rates would lead to a nearly 4% increase in consumer food prices globally.
“Almost half of this impact is due to higher shipping costs,” commented UNCTAD.
The intergovernmental organization said Russia is one of the most important players in the global market for fuel and fertilizer and disruptions in their 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.
While Russia is also a leading oil and gas exporter, UNCTAD’s report 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.”
Higher energy costs have led to higher marine bunker prices, increasing shipping costs for all sectors, according to UNCTAD, which noted that by the end of May 2022, the global average price for very low sulphur fuel oil (VLSFO) had increased by 64% with respect to the start of the year.
Taken altogether, UNCTAD officials said the increased costs imply higher prices for consumers and threaten to widen the poverty gap.
“Global trade depends on a complex system of ports and ships that connect the world. If global trade is to flow more smoothly, it must be ensured that Ukrainian ports are open to international shipping and that collaboration among transport stakeholders continues to provide services. Alternative ways of transport must also be pursued. And investment in transport and trade facilitation should be fostered as well as the support for the most vulnerable economies,” concluded UNCTAD.
