Ukraine war raises global vessel demand, shipping costs: UNCTAD

The shipping and transport hurdles in the Black Sea region can be attributed to disruptions in regional logistics, the halting of port operations in Ukraine, the destruction of important infrastructure, trade restrictions, increased insurance costs and higher fuel price, UNCTAD said in its report entitled ‘Maritime trade disrupted: The war in Ukraine and its effects on maritime trade logistics’ published on 28 June.

Shipping distances have also increased, along with transit times and costs.

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. The report added that between February and May 2022, the price paid for the transport of dry bulk goods such as grains increased by nearly 60 per cent.

The Russian Federation is also a leading oil and gas exporter. “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,” the report said.

Daily rates for smaller-size tankers, which are key for regional oil trading in the Black Sea, Baltic Sea and Mediterranean Sea regions, have dramatically increased. The higher energy costs have also led to higher marine bunker prices, raising shipping costs for all maritime transport sectors.

According to the report, by the end of May 2022, the global average price for very low sulphur fuel oil had increased by 64 per cent since the start of the year. Taken altogether, these increased costs imply higher prices for consumers and threaten to widen the poverty gap.

As part of the policy actions needed to keep global trade flowing, UNCTAD has called for urgent action to open Ukraine’s ports to international shipping so the country’s grain can reach overseas markets, at lower shipping costs.

The organisation further said that continued collaboration is needed among vessel flag states, port states and other actors in the shipping industry to maintain all necessary services, including bunkering supplies, health services for sailors and certification of regulatory compliance. This will help to keep to a minimum the negative impacts on costs, insurance premiums and operations.

Alternative ways of transport must be pursued and easing transit and the movement of transport workers – even temporarily – can reduce the pressure on cross-border trade and transit, as per UNCTAD.

The organisation has also called for more investment in transport services and trade and transit facilitation as well as more international support for developing countries, especially the most vulnerable economies, as the war in Ukraine adds to the challenges posed by the COVID-19 pandemic and the climate crisis.

Fibre2Fashion News Desk (KD)