How the triple crisis at the Suez, Panama and Ukraine canals affects world trade

What is world trade currently affected by? Perfect storm when three crises strike at the same time: Disruption of routes in Ukraine due to the war, near closure of the Suez Canal due to bombing in the Red Sea and a severe reduction in traffic in the Panama Canal.

Jan Hofmann, head of the technology division at UNCTAD, the United Nations organization for trade and development, said this at a telematic press conference at the UN Headquarters.

reduction in commercial traffic

Hoffman explained it The Panama Canal currently has 36% less traffic than last year, And due to the decline in water levels due to drought in the region, i.e. due to reasons specifically linked to climate change, it is 62% lower than last time.

To this crisis, which has no end in sight, tensions in the Red Sea have also been added. through which 20% of the world’s containers transit and are vital for connections between Europe and Asia: currently, container transit has declined by 67% compared to a year ago, and given that large container ships are most affected, but represent an even higher percentage of the total volume of affected goods.

There are now 77% fewer cargoes carrying oil than a year ago, And those that transport gas – which would suffer more dramatically if their tanks were shot at – have avoided the Red Sea route altogether since Jan. 16, he said.

Drastic drop in traffic leads to increase in prices

This sharp drop in traffic is visible as prices rise in large ports such as Shanghai – due to unexpected parking or greater risk assumed by insurers, where prices for shipping companies normally fell between December and last Friday. There has been an increase of 122%. , this percentage increases to 256% in the case of ships bound for Europe.

Another unwanted effect of the virtual closure of the Red Sea and reduced capacity in Panama is the lengthening of sea routes, because This is forcing large shipping companies to detour to South America or Africa, resulting in additional consumption of tons of fuel and impact on greenhouse gases.

Hoffman cited as an example the first effects of the war in Ukraine, reflected in food inflation, which was particularly suffered by Third World countries, and pointed out that, if the current crisis continues, more Global inflation and delays can be taken for granted. The logistics chain in general is similar to what was seen during the Covid pandemic.