War in Ukraine driving skyrocketing shipping costs

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The war is suffocating trade and logistics in Ukraine and in the Black Sea region, whilst soaring shipping costs threaten to provoke a crisis in food-import-dependent countries.

A report published by the UN Conference on Trade and Development (UNCTAD) has found that shipping and transport hurdles in the Black Sea region are severely impacting maritime trade around the world.

The effects of the war in Ukraine have led to halting of port operations, damaged infrastructure, trade restrictions, increased insurance costs, and higher fuel prices.

As trading partners are forced to turn to other countries for the commodities they import, shipping distances have increased along with transit times and costs.

In particular, the UNCTAD has found that grain shipments have suffered the strongest blow. Grain prices have been increasing over the past two years, but the war has reversed the latest trend showing a temporary decline.

“Grains are of particular concern given the leading role of the Russian Federation and Ukraine in agrifood markets, and its nexus to food security and poverty reduction,” the report says.

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 accompanying increase of grain prices and freight rates would lead to a 3.7 per cent increase in consumer food prices globally, according to UNCTAD.

As the Russian Federation is a giant in the global market for key agricultural inputs – such as fuel and fertiliser – disruptions in its supply is especially alarming and can provoke serious consequences for global food security, particularly in vulnerable and food-import-dependent economies.

The UN division has called for an urgent action to open Ukraine’s ports to international shipping again and prevent global trade stagnation.

Russia has heavily suffered the effects of global sanctions on its trade, as the nation’s container throughput during the first quarter of 2022 plunged by 5.4 per cent year-on-year, totalling 1.71 million TEU.

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