UN / RED SEA TRADE

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UNCTAD, the UN’s trade and development body, has sounded the alarm over the escalating attacks on shipping in the Red Sea and their impact on global trade routes already under strain. UNIFEED
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STORY: UN / RED SEA TRADE
TRT: 01:54
SOURCE: UNIFEED
RESTRICTIONS: NONE
LANGUAGE: ENGLISH / NATS

DATELINE: 25 JANUARY 2024, NEW YORK CITY / FILE

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Shotlist

FILE - NEW YORK CITY

1. Wide shot, United Nations Headquarters

25 JANUARY 2024, NEW YORK CITY

2. Wide shot, press room
3. SOUNDBITE (English) Jan Hoffmann, Chief, Trade Facilitation Section, United Nations Conference on Trade and Development (UNCTAD):
“More than 80 percent of volume of trade in goods is carried by sea, and the percentage is even higher for most developing countries. So, it's maritime transport is really the lifeline of global trade. We are very concerned that the attacks on Red Sea shipping are adding tensions and costs to global trade, exacerbating trade disruption due to geopolitics and climate change.”
4. Wide shot, press room
5. SOUNDBITE (English) Jan Hoffmann, Chief, Trade Facilitation Section, United Nations Conference on Trade and Development (UNCTAD):
“So, the Red Sea route and the Suez Canal is critical for global trade flows. The Suez Canal handled approximately 12 to 15 percent of global trade. For container shipping, it's even more important: 20 percent of the world's container trade goes through the Suez Canal.”
6. Wide shot, press room
7. SOUNDBITE (English) Jan Hoffmann, Chief, Trade Facilitation Section, United Nations Conference on Trade and Development (UNCTAD):
“Now, the impact of the Red Sea crisis on shipping costs and rates now has been dramatic. The surge in the average container spot rate from Shanghai went up by plus USD 500. And that was the highest-ever weekly increase.”
8. Wide shot, press room
9. SOUNDBITE (English) Jan Hoffmann, Chief, Trade Facilitation Section, United Nations Conference on Trade and Development (UNCTAD):
“Inflation is of concern; prolonged disruptions, especially to container shipping, would threaten and disrupt global supply chains, leading to delayed deliveries of goods, increased costs, and potential inflation, and we have seen that this can happen during the COVID-19 supply chain crisis.”
10. Wide shot, press room

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Storyline

The UN’s trade and development body (UNCTAD) has sounded the alarm over the escalating attacks on shipping in the Red Sea and their impact on global trade routes already under strain.

Briefing reporters virtually from Geneva today (25 Jan) on disruptions to trade in the Red Sea, Jan Hoffmann, chief of the UNCTAD Trade Facilitation Section, explained that more than 80 percent of the volume of trade in goods is carried by sea and, he added, “the percentage is even higher for most developing countries. So, it's maritime transport is really the lifeline of global trade.”

He also said, “We are very concerned that the attacks on Red Sea shipping are adding tensions and costs to global trade, exacerbating trade disruption due to geopolitics and climate change.”

Hoffmann continued, “The Red Sea route and the Suez Canal is critical for global trade flows. The Suez Canal handled approximately 12 to 15 percent of global trade. For container shipping, it's even more important: 20 percent of the world's container trade goes through the Suez Canal.”

But since November 2023, Houthi-led attacks in the Red Sea have led major players in the shipping industry to halt Suez transits and search for other routes temporarily.

UNCTAD estimates that the trade volume going through the Suez Canal decreased by 42 percent over the last two months.

Hoffmann cited the ongoing war in Ukraine and other geopolitical tensions that have reshaped oil and grain trade routes.

Compounding the situation is the severe drought hitting the Panama Canal, another key route for global trade.

Water levels have reached their lowest point in decades, severely reducing the number and size of ships that can transit through the canal.

Last month’s total transits through the Panama Canal were 36 percent lower than one year ago and 62 percent lower than two years ago. The lower capacity of the Panama Canal due to climate change is of concern because of its long-lasting impacts on supply chains.

Hoffmann said, “The impact of the Red Sea crisis on shipping costs and rates now has been dramatic. The surge in the average container spot rate from Shanghai went up by plus USD 500. And that was the highest-ever weekly increase.”

Hoffmann stressed, “Inflation is of concern; prolonged disruptions, especially to container shipping, would threaten and disrupt global supply chains, leading to delayed deliveries of goods, increased costs, and potential inflation, and we have seen that this can happen during the COVID-19 supply chain crisis.”

Early data from 2024 reveals that over 300 container vessels, over 20 percent of global container capacity, were diverting from or planning alternatives to the Suez Canal.

Shanghai's average container shipping spot rates have increased by 122 percent since early December. The rates from Shanghai to Europe went up by 256 percent. Rates to the West Coast of the United States have increased by 162 percent.

Since November, major players in the shipping industry have temporarily halted transits through the Suez Canal, opting instead to go around South Africa.

Container ship transits per week are 67 percent lower than one year ago.

The disruptions in key global trade routes also affect energy prices and raise inflation risks.

Prolonged disruptions in major trade routes would disrupt global supply chains, leading to delayed deliveries of goods, increased costs, and potential inflation.

The shipping industry is already witnessing immediate impacts, with spot rate increases from Asia to Europe exceeding the levels seen in 2023.

The rates between China and the Mediterranean have tripled since early December.

The longer trade distances and higher freight rates could have cascading effects on food prices.

UNCTAD estimates that about half of the increase in food prices observed in 2022 was due to higher transport costs.

The Red Sea crisis is causing significant disruptions in the shipments of grains and other key commodities from Europe, Russia, and Ukraine.

This situation leads to increased consumer costs and serious risks to global food security, especially in regions like East Africa, South Asia, Southeast Asia, and East Asia, which rely heavily on wheat imports from Europe and the Black Sea area.

Furthermore, disruptions in imports are likely to exacerbate food inflation, placing additional burdens on countries where imports constitute a large share of consumption.

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