Saturday, April 13, 2024

Ethiopia braces for impact as UNCTAD highlights disruptions in global trade routes


By our staff reporter

The United Nations Conference on Trade and Development (UNCTAD) has sounded the alarm on the impact of recent attacks on shipping in the Red Sea, with their latest report titled “Navigating Troubled Waters: The Impact to Global Trade of Disruption of Shipping Routes in the Red Sea, The Black Sea, and the Panama Canal,” shedding light on the far-reaching consequences for global trade.

Ethiopia, like many nations heavily reliant on maritime trade, faces mounting challenges as disruptions in key shipping routes reshape the global trade landscape. The recent attacks in the Red Sea have particularly affected maritime trade routes, notably through the Suez Canal, leading to significant shifts in established patterns.

UNCTAD’s report underscores the gravity of the situation, citing a 42% decrease in transits through the Suez Canal compared to peak levels. Major players in the shipping industry have temporarily suspended Suez transits, resulting in a 67% reduction in weekly container ship transits. The ramifications extend to container carrying capacity, tanker transits, and gas carriers, all of which have experienced substantial declines.

The economic and environmental costs of avoiding the Suez Canal are substantial, with rerouting around the Cape of Good Hope leading to increased trade costs, longer cargo travel distances, and higher insurance premiums. Moreover, the surge in average container spot freight rates poses additional challenges, impacting both developing economies and global supply chains.

Ethiopia’s foreign trade, like that of several East African countries, heavily relies on the Suez Canal. Djibouti, Kenya, Tanzania, and Sudan are among the nations most dependent on the canal, with significant portions of their trade volumes traversing this route.

UNCTAD warns of soaring prices and inflation as prolonged disruptions in container shipping threaten global supply chains. Consumers are expected to feel the full impact of higher freight rates within a year, while the discontinuation of gas transits could drive up energy prices, further affecting global food prices.

Moreover, the acceleration of vessel speeds to maintain schedules amidst disruptions has led to higher fuel consumption and greenhouse gas emissions. UNCTAD estimates a potential 70% increase in greenhouse gas emissions for certain round trips, highlighting the climate impact of these developments.

Developing countries, including Ethiopia, are particularly vulnerable to these disruptions, emphasizing the urgent need for swift adaptations and robust international cooperation to manage the evolving situation. The challenges underscore the exposure of global trade to geopolitical tensions and climate-related challenges, emphasizing the necessity for collective efforts to find sustainable solutions.

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