© Shutterstock/Unkas Photo | A cargo crane and a grain dryer in the port of Odessa, Ukraine.

The United Nations Conference on Trade and Development (UNCTAD) says the war in Ukraine is stifling trade and logistics in the country and the Black Sea region, increasing global demand for ships and the cost of shipping in the world.

In a report entitled “Disrupted maritime trade: the war in Ukraine and its effects on maritime trade logistics” published on 28 June, UNCTAD indicates that Ukraine’s trading partners must now look to other countries for products they import.

He attributes the obstacles to navigation and transport in the Black Sea region to disruptions in regional logistics, the shutdown of port operations in Ukraine, the destruction of important infrastructure, trade restrictions, the increase insurance costs and rising fuel prices.

Shipping distances have increased, 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 their link to food security and poverty reduction,” the report said.

Soaring transport costs drive up food prices

Fewer grain shipments over longer distances lead 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 drop in shipping prices.

The report indicates that between February and May 2022, the price paid for the transport of dry bulk goods such as cereals increased by almost 60%.

The concomitant increase in grain prices and freight rates would lead to a 3.7% increase in global consumer food prices.

The Russian Federation is a giant in the global market for fuels and fertilizers, which are essential inputs for farmers around the world.

Disruptions in their supply can lead to lower cereal yields and higher prices, with serious consequences for global food security, especially in vulnerable economies dependent on food imports.

Rising energy prices exacerbate challenges for shippers

The Russian Federation is also a major oil and gas exporter.

“Faced with trade restrictions and logistical challenges, the cost of oil and gas has increased as other sources of supply, often in more remote locations, are called upon,” the report said.

Daily rates for smaller tankers, which are essential for regional oil trade in the Black Sea, Baltic Sea and Mediterranean Sea regions, have increased significantly.

Higher energy costs have also driven up the prices of marine bunkers, increasing shipping costs for all sectors of shipping.

According to the report, by the end of May 2022, the global average price of ultra-low sulfur fuel oil had increased by 64% since the start of the year.

Taken together, these increased costs imply higher prices for consumers and threaten to widen the poverty gap.

Policy actions needed to keep global trade flowing

UNCTAD calls for urgent action to open Ukrainian ports to international shipping so that the country’s grain can reach foreign markets, at reduced transport costs.

The organization says continued collaboration is needed between ships’ flag states, port states and other shipping industry players to maintain all necessary services, including bunker supplies, health services for seafarers and certification of regulatory compliance.

This will help minimize negative impacts on costs, insurance premiums and operations.

UNCTAD also says that alternative means of transport should be sought and that facilitating the transit and movement of transport workers – even temporarily – can reduce the pressure on cross-border trade and transit.

In addition, UNCTAD calls for more investment in transport services and trade and transit facilitation.

And more international support for developing countries, especially the most vulnerable economies, as the war in Ukraine adds to the challenges posed by the COVID-19 pandemic and the climate crisis.