The United Nation's top most trade body has expressed concerns over the escalating disruptions in global trade, which continues to negatively impact on economies.
This includes food shortages in Africa, rising food prices globally and unrest amongst Eastern European farmers whose produces set for international markets have been greatly affected.
The disruptions are mainly as a result of geopolitical tensions affecting shipping in the Black Sea, recent attacks on vessels in the Red Sea affecting the Suez Canal and the impact of climate change on the Panama Canal.
United Nations Conference on Trade and Development (UNCTAD) underscores the critical role maritime transport plays as the backbone of international trade, responsible for over 80 per cent of the global movement of goods.
According to the UN trade and development body, the attacks on Red Sea shipping, coupled with existing geopolitical and climate-related challenges, have given rise to a complex crisis affecting key global trade routes.
UNCTAD estimates that the weekly transits going through the Suez Canal decreased by 42 per cent over the last two months.
The ongoing conflict in Ukraine has triggered substantial shifts in oil and grain trades, reshaping established trade patterns.
Simultaneously, the Panama Canal, a pivotal conduit for global trade, is grappling with diminished water levels, resulting in a staggering 36 per cent reduction in total transits over the past month, compared to a year ago.
The long-term implications of climate change on the canal's capacity are raising concerns about enduring impacts on global supply chains.
The crisis in the Red Sea, marked by Houthi-led attacks disrupting shipping routes, has added another layer of complexity.
Major players in the shipping industry have temporarily suspended Suez transits in response.
Notably, container ship transits per week have plummeted by 67 per cent compared to a year ago, with container carrying capacity, tanker transits, and gas carriers experiencing significant declines.
The surge in the average container spot freight rates during the last week of December, by plus $500(Sh80,745), in one week, was the highest ever weekly increase.
Average container shipping spot rates from Shanghai this week are up by 122 per cent, industry trend show, compared to early December.
The rates from Shanghai to Europe went up by 256 per cent (more than tripled) while rates to the United States West coast also increased above average, although they do not go through Suez. They increased by 162 per cent.
“The cumulative effect of these disruptions translates into extended cargo travel distances, escalating trade costs, and a surge in greenhouse gas emissions from shipping having to travel greater distances and at greater speed,” UNCTAD said in a statement.
Avoiding the Suez and Panama Canal necessitates more days of shipping, resulting in increased expenses.
The prices per day of shipping and insurance premiums have also surged, compounding the overall cost of transit.
Additionally, ships are compelled to travel faster to compensate for detours, burning more fuel per mile and emitting more carbon dioxide, further exacerbating environmental concerns.
Developing and poor countries are particularly vulnerable to these disruptions, according to UNCTAD, which said it remains vigilant in monitoring the evolving situation.
Kenya and the East African region are among those staring at a sharp increase in freight costs as container prices more than triple in the last 40 days, signalling a rise in commodity prices.
This adds up to freight adjustments already made by shipping lines to recover costs of re-routing vessels to avoid attacks by in the Red Sea.
The attacks on vessels which began in mid-December, in response to Israel's bombardment of Gaza, has seen shipping lines avoid the Red Sea and Suez Canal, a key route for ships to Mombasa and the East African coastline.
Major global companies among them leading container shipping lines Mediterranean Shipping Company (MSC) and Maersk, are among those hard hit.
Ports in China, which is Kenya’s biggest single import source, have had the highest week-on-week increases in container leasing prices, which in December went up from an average $1,200 (Sh193,788) to above $1,500 (Sh242,235 ).
Kenya imported goods worth Sh452.6 billion from China in 2022, the Economic Survey 2023 indicates, with the Asian country remaining a major source into 2023 and this year.
Key imports include electrical, electronic equipment, machinery, nuclear reactors, plastic, footwear, ceramics and railway equipment.
“Retailers must get used to keeping higher inventories as supply chain disruptions become a norm,” said Christian Roeloffs, cofounder and CEO, Container xChange, a global technology firm that offers container trading and leasing platform.
The Shippers Council of Eastern Africa (SCEA) also maintains that the disruption has a major impact as vessels re-route through West African maritime route, while others call at Djibouti to avoid going through Suez.
“The impact is longer vessel times and effect for transhipment ports in Asia and Middle East, that service majorly Eastern Africa ports,” SCEA told the Star.
With Kenya remaining a net importer, households are also staring at costly goods on the back of a weak shilling to the US dollar, as it hit a record-low of Sh160 to a unit of the dollar.
