Rough seas ahead: How can global supply chains navigate shipping disruptions?
Summary
TLDRIn this special edition of the Weekly Trade Cast, host Sarah Toms celebrates 60 years of UN Trade and Development's impact on global lives and economies. The episode focuses on the current challenges in global supply chains due to shipping disruptions, with insights from UN Trade and Development's Secretary-General Rebecca Grinspan and Yan Hoffman. They discuss the effects of geopolitical tensions in the Middle East and environmental issues at the Panama Canal, emphasizing the interconnectedness of trade, climate change, and development. The conversation highlights the importance of collective action and the need for resilience in the face of energy transition and climate change, which are reshaping the future of maritime transport and global trade.
Takeaways
- đ This year marks the 60th anniversary of the United Nations Conference on Trade and Development (UNCTAD), celebrating its transformative impact over the past six decades.
- đ The Weekly Tradecast will feature special episodes in June, highlighting UNCTAD's evolution and its positive impact on global trade and development.
- đą Global supply chains are facing significant disruptions due to maritime transport challenges, which are crucial for global trade as ships carry about 80% of global goods.
- đ The Red Sea has seen attacks on vessels by Houthi rebels, causing a diversion of traffic and affecting one of the world's most important shipping shortcuts.
- đ The Panama Canal is experiencing disruptions due to low water levels, reducing the number and size of ships that can pass through, affecting global trade routes.
- đ§ Rebecca Grynspan, Secretary-General of UNCTAD, emphasizes the interconnectedness of trade, climate change, and development, and the importance of collective action to face global challenges.
- đ Supply chains are still recovering from the pandemic and cost of living crises, with shipping challenges adding further pressure on the global economy.
- â±ïž Diversion of commercial ships from the Red Sea to longer routes is impacting producers and consumers through increased costs and time.
- đ The Panama Canal's reduced capacity due to climate change and El Niño is causing congestion and forcing ships to take alternative, less efficient routes.
- đ Developing countries are particularly affected by these disruptions, and UNCTAD research indicates that improving port and trade efficiency can mitigate some of these impacts.
- đż The energy transition in maritime transport is a significant challenge, with goals set by the International Maritime Organization to decarbonize shipping by 2050, requiring alternative fuels and global regulations.
Q & A
What is the significance of the year for UN Trade and Development?
-This year marks a big milestone for UN Trade and Development as they celebrate 60 years of transforming lives and building brighter futures.
What is the focus of the special episodes in the Weekly Tradecast?
-The special episodes in the Weekly Tradecast are featuring insightful stories on the organization's evolution and impact over the last six decades, as well as the positive changes expected in the next 60 years.
What is the biggest challenge for maritime transport according to the script?
-The biggest challenge for maritime transport, and thus for global trade, is the energy transition, which involves the shift to ships using alternative fuels and the readiness of ports for these changes.
How has the situation in the Middle East affected global shipping?
-Tensions high in the Middle East, particularly attacks by Houthi rebels on vessels in the Red Sea, have diverted large amounts of traffic from one of the world's most important shipping shortcuts.
What is the current issue with the Panama Canal?
-The Panama Canal is suffering disruptions due to low water levels, which reduce the number and size of ships that can pass through.
What does Rebecca Grinspan, Secretary-General of UN Trade and Development, highlight about the Panama Canal situation?
-Rebecca Grinspan highlights that the Panama Canal operation teaches us about the power of collective action and shows that trade, climate change, and development are interconnected, emphasizing our collective responsibility to face global challenges.
What is the impact of the longer shipping routes on producers and economies?
-The longer shipping routes lead to increased time and higher costs, which affect production cycles, choices, and ultimately impact prices, inventory holding costs, and the cost of renting ships.
What are the main issues with the Panama Canal, and are there any quick solutions?
-The main issues with the Panama Canal are low water levels causing reduced capacity. Quick solutions are not expected as the situation depends on factors like the efficiency of water management and the upcoming rain season.
How are developing countries affected by the disruptions in global supply chains?
-Developing countries, especially those dependent on choke points like the Panama Canal, are impacted by the disruptions, and they need to focus on long-term plans to improve their port and trade efficiency.
What are the core determinants of transport costs according to UN Trade and Development research?
-The core determinants of transport costs are distance, imbalances in cargo, type of cargo, economies of scale, competition, and port and trade efficiency including digitalization and private sector participation.
What are the geopolitical implications of the energy transition in shipping?
-The geopolitical implications include the impact on who will be the new providers of alternative fuels, and how changes in shipping costs due to the energy transition will affect different countries.
What topics will be discussed at the UN Global Supply Chain Forum?
-The UN Global Supply Chain Forum will discuss topics such as port and energy specialization, digitalization, trade facilitation, climate change adaptation, and food security, especially in relation to small island developing states.
Outlines
đ UN Trade and Development's 60th Anniversary Celebrations
The video script introduces a special series of episodes for the UN Trade and Development's 60th anniversary, highlighting the organization's transformative impact over the past six decades. Sarah Toms, the host, invites viewers to join in June for stories of evolution and future positive changes. The episode also addresses current challenges in global supply chains, such as shipping disruptions and the energy transition's impact on maritime transport. The script mentions the significance of the Panama Canal and the Red Sea as strategic shipping shortcuts facing their own issues, emphasizing the interconnectedness of trade, climate change, and development.
đą Global Supply Chain Disruptions and Their Economic Impact
This paragraph delves into the specifics of global supply chain disruptions, focusing on the challenges faced by maritime transport due to geopolitical tensions and environmental factors. The diversion of shipping routes from the Red Sea and the Panama Canal's operational issues due to low water levels are highlighted. The Secretary-General of UN Trade and Development, Rebecca Grinspan, underscores the importance of collective action to address these challenges. Yan Hoffman, head of the trade logistics branch, discusses the ripple effects of these disruptions on producers and consumers, including increased costs, longer shipping times, and potential price inflation.
đ Addressing the Challenges of Climate Change and Geopolitics in Global Trade
The final paragraph discusses the broader implications of climate change and geopolitics on global trade. It touches on the energy transition in maritime transport, with the International Maritime Organization's goals to decarbonize shipping by 2050. The script points out the interdependence between ships and ports in adopting alternative fuels and awaiting global regulations. The upcoming UN Global Supply Chain Forum in Barbados is mentioned as a platform to address these challenges, along with other topics like digitalization, food security, trade facilitation, and climate change adaptation. The paragraph concludes by emphasizing the need for collaboration among various sectors to tackle the increasing complexities and challenges in global supply chains.
Mindmap
Keywords
đĄUN Trade and Development
đĄGlobal Supply Chains
đĄShipping Disruptions
đĄMaritime Transport
đĄEnergy Transition
đĄClimate Change
đĄCollective Action
đĄTrade Logistics
đĄPandemic Recovery
đĄCost of Living Crisis
đĄDecarbonization
Highlights
This year marks the 60th anniversary of UN Trade and Development, celebrating transformative work over six decades.
The Weekly Tradecast will feature special episodes in June, sharing stories of evolution and impact in global trade.
Yan Hoffman discusses upcoming challenges in global supply chains due to shipping disruptions.
Energy transition poses a significant challenge for maritime transport and global trade.
Shipping disruptions are causing major issues for the movement of goods, with ships carrying about 80% of global goods.
Middle East tensions have led to attacks on vessels in the Red Sea, diverting significant traffic from key shipping routes.
The Panama Canal faces its own disruptions due to low water levels, affecting the passage of ships.
UNCTAD Secretary-General Rebecca Grynspan emphasizes collective action in response to the Panama Canal situation.
Climate change, development, and international trade are interconnected, requiring joint action to solve global challenges.
Supply chains are still recovering from the pandemic and cost of living crisis, with shipping challenges adding pressure to the global economy.
Commercial ships are taking longer routes to avoid the Red Sea, impacting producers and consumer economies.
Longer shipping routes and delays affect production cycles, inventory costs, and ultimately prices.
The Panama Canal's reduced capacity due to climate change has led to congestion and increased reliance on alternative routes.
Few alternatives exist to the Panama Canal, with the landbridge and railway through Panama seeing increased demand.
Developing countries need to focus on improving port and trade efficiency to mitigate the impact of shipping disruptions.
Six core determinants influence transport costs, with digitalization and private sector participation key to improving trade competitiveness.
The energy transition in shipping is a major challenge, with goals set to decarbonize the industry by 2050.
Geopolitical implications arise as the energy transition impacts who will provide alternative fuels and potentially increase shipping costs.
The first UN Global Supply Chain Forum will address various challenges and opportunities in supply chains and the global economy.
Key topics at the forum will include digitalization, energy savings, food security, trade facilitation, and climate change adaptation.
Transcripts
hello this is the weekly trade cast I'm
Sarah Toms this year is a big milestone
for un trade and development as we Mark
60 years of transforming lives and
building brighter Futures as part of the
celebrations the weekly tradecast is
featuring a series of special episodes
join us in June for insightful stories
on our Evolution and impact over the
last six decades and even more positive
changes in the next 60 years
coming up now Yan Hoffman tells us about
some rough Seas ahead AS Global Supply
chains navigate shipping disruptions the
biggest challenge for maritime transport
and as such also very important
challenge for global trade is the energy
transition the ships are maybe waiting
for the ports and the ports are waiting
for the ships everybody is waiting for
Global
regulations this week as the global
supply chain Forum gets underway we're
getting an update on shipping disruption
that are causing major challenges for
the movement of goods around the world
ships carry about 80% of goods globally
from production to consumption with
tensions high in the Middle East
attacked by Hoodie Rebels on vessels in
the Red Sea have diverted large amounts
of traffic from one of the world's most
important shipping
shortcuts another shortcut the Panama
Canal is suffering its own disruptions
as low water levels reduce the number
and size of ships that can pass through
through Rebecca grinspan Secretary
General of un trade and development has
just been on the ground in Panama this
is what she says about the
situation and I am strucked by what all
this operation in the Panama Canal
teaches us all because this is not only
a shortcut between the oceans this shows
us what we can do with Collective action
this shows us that trade climate change
and development are interconnected and
that it depends on us on what we do
together to really be able to face the
challenges that the world has to solve
right now climate change development and
international trade are part of the
solution if we make it
happen Supply chains are still
recovering from the pandemic and the
cost of living crisis so these shipping
challenges add even more pressure on the
global economy Yan Hoffman head of the
trade Logistics Branch at un trade and
development gave us an overview in
February he's back here today for an
update on the disruptions and how
countries businesses and consumers are
coping well welcome back Yan it's good
to have you back on the show now for
several months now many commercial ships
have been taking longer routes to avoid
the Red Sea what effects are these
diversions and delays having on the
producers of goods and on the economies
that consume
them yes the longer time and the
associated higher costs both have a
bearing on yeah production Cycles
choices and in the end slowly but surely
there are impacts on prices the
inventory holding cost the waiting the
additional cost and the additional days
of of shipping you have to pay more days
of renting ships of using the ship and
the price per day of ship has also gone
up because of demand Supply balances
there's a limited number of ships if you
need more of them more days prices go up
so the the higher costs per day of
shipping the the longer distance and
also now you mentioned both the
challenges the Panama Canal and the Z
Canal they compound each other so if I
no longer have the choice or it's
getting more complicated more cost leag
takes longer to go from Asia to the US
East Coast via Ze then normally I would
use even more the Panama Canal but this
one as we have seen has also seen the
reduced capacity so now it's congestion
everywhere it's it's more containers
going also through the west coast of the
US so they cross the Pacific go to Los
Angeles Long Beach and then they take
the train all this this adds costs it
adds time it adds to emissions you
mentioned the Panama Canal what are the
main issues and do you see any solutions
happening quickly there quickly
certainly
not so it it's really a fascinating
topic being in Panama several times and
seeing how this has been growing
improving how the new locks were
inaugurated over the last 25 years the
new lock
actually are much more efficient than
the O loocks they use somewhat less
water actually per Transit although the
ships that go through them are much much
bigger these are huge amounts of water I
was just yesterday making some little
calculations so one ship that transits
through Panama through the six locks
uses 750 million lers of fresh water we
here in in Switzerland on average use
4,200 L per day this is also a lot
because that includes all the
Agriculture and so on and so that means
a couple of Swiss persons could use
1,000 years of fresh water with one
Transit and now we have a Nino we have
climate change we have yeah we have a
situation where there is not enough
fresh water and the capacity of the
canal has significantly gone down used
to be 30 six transits per day now it
went down to 24 at some point in time 18
it's now slowly going up but in terms of
Alternatives unfortunately there are not
many we were just saying Ze is no longer
so much of an alternative because that
was the two canes compete so for the
trade between Asia East Asia especially
China and the United States these are
the two Alternatives and both are now
reduced the biggest competitor of the
Panama Canal is also the the so-call
landbridge meaning you take the
container to Los Angeles Long Beach and
there you continue by train so-call
intermoor connection W that seems a long
route this is a long route is more
expensive there are plans of an
alternative canal in Nicaragua but there
are many environmental concerns
associated with this the railway through
Panama is seeing more demand in a way
it's like trans shipping within one port
so here you unload maybe on the Pacific
side you put it on the train and put it
on another ship on the Caribbean side
and this is also yeah seeing more demand
these days but none of all these is
really um an alternative to the standard
all water route through the canal and
the The panak Authority is making
efforts with water management in the
locks Technical Solutions to use the
water even more efficiently to Move It
from one side of the lock to another
this slow Clow down that means takes
longer to move the ships up and down
from the gon Lake but it's all different
types of small solutions to improve the
situation no quick fix inside the most
immediate question is how much will it
rain in the next rain season and
actually it has rained a bit more
recently so the very recent numbers have
seen improvements we have seen a slight
increase in transits again so this is
really yeah everybody's looking at the
weather
forecast which the weather forecast in
Panama has a bearing on global trade
roots and prices that's an interesting
thought now what about developing
countries what are their specific
challenges here and what help do they
need to ease the impact of these
disruptions then for the Panama Canal
the most impacted country is of course
Panama itself because the the canal is
an important part of the countries
economy then there are countries on the
South American West Coast Ecuador Chile
Peru but what can countries do and here
I'm afraid there are not many things
country that depends on these choke
points can do except key long-term plans
to improve their own port and trade
efficiency we have done quite some
in-depth research of what explains
differences in transport cost why do
some countries pay more than others for
their shipping and there are six core
determinants the first one is distance
where am I located if I'm a remote
island and so there's not much I can do
about it second Point imbalances I go
full one way go empty the other way that
increases cost not so much we can do
about it
although better connectivity more
options through canals also help there
third one is of course type of cargo
typee of goods can I containerize
further some of things but not much I
can do there economies of
scale the bigger the ships are the more
ports the deeper yeah the lower are the
unit costs competition is a fifth
component make sure that your shippers
have choices for between different
terminates between different shipping
and last but not least and that's really
the the message here where you can do
something is in your own
ports your trade station your Customs
your infrastructure your digitalization
private sector participation all these
things have shown to improve your own
trade competitiveness and it's
unfortunately doesn't solve the weather
forecast in in Panama on a positive note
there are many indicators that we look
at from our line of shipping
connectivity index to the world bank's
Logistics performance index to the
United Nations survey on crossborder
trade there year after year after year
this is getting better including during
covid actually yeah because there was
more PFF more more interest in improving
you can really see how different
countries have advanced at different
speeds and it does have an impact it
does improve trade competitiveness
prices at home and trade
efficiency the Red Sea disruptions are
about geopolitics and security and the
Panama Canal is environmental
the impact of climate change so what do
these two dynamics mean to the Future as
we continue trying as you said to make
shipping and supply chains more
resilient yeah the biggest challenge for
maritime transport and as such also a
very important challenge for global
trade is the energy transition there are
clear goals set by the international
Maritime organization to decarbonize
shipping by 2050 and to get there we
need very soon to have different ships
using alternative fuels the ports need
to get ready for the ships the ships are
maybe waiting for the ports and the
ports are waiting for the ships
everybody is waiting for Global
regulations what is the carbon price of
the future so all this it is in response
to climate change we we need to mitigate
we need to react but there are also
geopolitical implications because it
does have an impact on who will be the
new providers of the alternative feuds
what does it mean if shipping costs go
up somewhat they will go up we are doing
an impact assessment as we speak these
measures have different impacts on
different countries so there you have a
combination of politics uh political
responses preferences priorities and the
the big picture which is climate change
mitigation and the energy transition in
shipping the shipping disruption are
sure to be a big part of the global
supply chain Forum so what are other Hot
Topics around the challenges and
opportunities for Supply chains and the
global economy yes so our first un
Global Supply Chain Forum in Barbados
500 600 participants and all the topics
we have just been discussing will also
be discussed in depth with Port
Specialists with energy Specialists with
Supply train Specialists high level
heads of organizations but then all the
Interlink issues digitalization will be
a key topic we will present a new ANP
application on single Windows all the
issue of the linkages between
optimization and then also Energy
savings food Security will be a topic
because there are of course all these
supply chain disruptions have an effect
especially for a number of small island
developing States on on their food
security situation we will look at a
trade facilitation the implementation of
the WTO agreement we will look at
climate change adaptation it's a nice
connection the the challenge that we
have discussed just now the so getting
together really the who is who of Global
Supply chains and having them work
together from transport trade
facilitation politics private sector and
seeing
this is not going to get better there
will be more and more challenges
associated with the technological
advances challenges with the
decarbonization challenges with
Interruption with geopolitics so we
better work together wonderful well
thank you so much for that update thank
you to un trade and developments Yan
Hoffman who was this week's guest tune
into the weekly trade cast next week and
every week for more insights on the most
pressing issues around the world of
trade and development and there's even
more on our website on tad.org I'm Sarah
THS in Geneva goodbye for now
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