In a new report the United Nations Conference on Trade and Development (UNCTAD) has detailed how the war in the Ukraine is increasing the cost of shipping around the world.
The UNCTAD report looks at the shipping and transport hurdles in the Black Sea region 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 prices. Shipping distances have increased as a result of the 126-day long war, along with transit times and costs.
“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 states.
Fewer grain shipments over longer distances are leading to higher food prices. 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 says between February and May 2022, the price paid for the transport of dry bulk goods such as grains increased by nearly 60%. The accompanying increase of grain prices and freight rates would lead to a 3.7% increase in consumer food prices globally.
The Russian Federation is a giant in the global market for fuel and fertilizer, which are key inputs for farmers worldwide. Disruptions in their supply may lead to lower grain yields and higher prices, UNCTAD warned, with serious consequences for global food security, particularly in vulnerable and food-import-dependent economies.
Russia’s position too as a leading oil and gas exporter is also pushing up energy prices worldwide, the UNCTAD study shows.
“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 says.
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.
Taken altogether, UNCTAD officials said the increased costs imply higher prices for consumers and threaten to widen the poverty gap.
UNCTAD has reiterated calls for urgent action to open Ukraine’s ports to international shipping so the country’s grain can reach overseas markets, at lower shipping costs.