Rough seas ahead: How can global supply chains navigate shipping disruptions?

Summary

In 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

• 🎉 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.
• 🌐 The Weekly Tradecast will feature special episodes in June, highlighting UNCTAD's evolution and its positive impact on global trade and development.
• 🚢 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.
• 🛑 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.
• 🌊 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.
• 💧 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.
• 🔄 Supply chains are still recovering from the pandemic and cost of living crises, with shipping challenges adding further pressure on the global economy.
• ⏱️ Diversion of commercial ships from the Red Sea to longer routes is impacting producers and consumers through increased costs and time.
• 🌍 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.
• 🔍 Developing countries are particularly affected by these disruptions, and UNCTAD research indicates that improving port and trade efficiency can mitigate some of these impacts.
• 🌿 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

00:00

🎉 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.

05:01

🚢 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.

10:03

🌎 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.

Keywords

💡UN Trade and Development

UN Trade and Development refers to the United Nations Conference on Trade and Development (UNCTAD), an organization that works to ensure trade is a vehicle for inclusive growth and poverty reduction. In the script, it is mentioned as celebrating 60 years of transforming lives and building brighter futures, indicating its long-standing commitment to global economic development.

💡Global Supply Chains

Global supply chains are the networks of organizations, people, activities, information, and resources involved in producing and delivering a product or service. The script discusses the challenges faced by global supply chains, such as shipping disruptions, which are critical for the movement of goods around the world.

💡Shipping Disruptions

Shipping disruptions refer to any events that interrupt the normal flow of goods through maritime transport. The script mentions specific disruptions such as attacks on vessels in the Red Sea and low water levels in the Panama Canal, which have significant impacts on global trade.

💡Maritime Transport

Maritime transport involves the movement of goods and passengers by sea. It is highlighted in the script as a crucial component of global trade, with ships carrying about 80% of goods globally. Disruptions in maritime transport can have widespread economic consequences.

💡Energy Transition

Energy transition refers to the shift from using non-renewable energy sources to renewable ones. The script discusses the energy transition as a significant challenge for maritime transport, with the need for ships to use alternative fuels and ports to prepare for these changes.

💡Climate Change

Climate change is a long-term change in the Earth's climate, primarily due to human activities. The script connects climate change to the challenges faced by the Panama Canal due to low water levels, illustrating how environmental changes can disrupt global trade routes.

💡Collective Action

Collective action refers to when individuals or groups work together to achieve a common goal. The script mentions collective action as a way to address the challenges faced by the Panama Canal and the interconnectedness of trade, climate change, and development.

💡Trade Logistics

Trade logistics involves the management of the flow of goods and services between the point of origin and the point of consumption. The script discusses Yan Hoffman, head of the trade logistics branch at UNCTAD, who provides insights into the shipping disruptions and their impact on global trade.

💡Pandemic Recovery

Pandemic recovery refers to the process of returning to normal conditions after a widespread disease outbreak. The script mentions that supply chains are still recovering from the effects of the pandemic, which adds to the challenges of current shipping disruptions.

💡Cost of Living Crisis

Cost of living crisis refers to a situation where the cost of basic goods and services becomes unaffordable for many people. The script notes that shipping challenges add pressure to the global economy, which can exacerbate the cost of living crisis.

💡Decarbonization

Decarbonization is the process of reducing or removing the amount of greenhouse gases released into the atmosphere. The script discusses the goals set by the International Maritime Organization to decarbonize shipping by 2050, emphasizing the need for alternative fuels and global regulations.

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