Key shipping routes in the Red Sea, Black Sea, and Panama Canal are simultaneously under threat, with far-reaching implications for inflation and food and energy security.

Recent attacks on commercial vessels in the Red Sea have severely affected shipping through the Suez Canal, adding to existing geopolitical and climate-related challenges facing global trade and supply chains, UNCTAD says in a new report released on 22 February.

The Red Sea crisis compounds the ongoing disruptions in the Black Sea due to the war in Ukraine, which have resulted in shifts in oil and grain trade routes and altered established patterns.

Additionally, the Panama Canal, a critical artery linking the Atlantic and Pacific oceans, is confronting a separate challenge. Dwindling water levels have raised concerns about the long-term resilience of global supply chains, underscoring the fragility of the world's trade infrastructure.

UNCTAD estimates that transits passing the Suez Canal decreased by 42% compared to its peak. With major players in the shipping industry temporarily suspending Suez transits, weekly container ship transits have fallen by 67%, and container carrying capacity, tanker transits, and gas carriers have experienced significant declines.

Meanwhile, total transits through the Panama Canal plummeted by 49% compared to its peak.

Transits almost cut in half in the two international canals

Number of monthly transits in Suez and Panama Canals, October 2021–January 2024

Oct ’21Jan ’22Apr ’22Jul ’22Oct ’22Jan ’23Apr ’23Jul ’23Oct ’23Jan ’2405001 0001 5002 0002 500Suez CanalNov ’222 098Suez CanalNov ’222 098Suez CanalPanama CanalDown 49%Down 49%Down 42%Down 42%PeakPeakPeakPeakSource: UNCTAD calculations, based on data from Clarksons Research. 

Costly uncertainty

Mounting uncertainty and shunning the Suez Canal to reroute around the Cape of Good Hope has both economic and environmental repercussions, particularly for developing economies.

Growing significantly since November 2023, the surge in the average container spot freight rates registered the highest-ever weekly increase of $500 in the last week of December. This trend has continued.

Average container shipping spot rates from Shanghai more than doubled since early December (+122%), growing more than threefold to Europe (+256%), and even above average (+162%) to the United States West Coast, despite not going through Suez.

Freight on the Suez Canal route sees the highest surge in rates

Spot freight rates from Shanghai, selected routes, per 20-foot equivalent unit (TEU), dollars

5Nov1219263Dec101724317Jan1421284Feb01 0002 0003 0004 0005 0006 0007 000*, Shanghai → East Coast North America**, and Shanghai → West Coast North America.">Shanghai → Europe*Shanghai → East Coast North America**Shanghai → West Coast North AmericaNote: *Route goes normally through the Suez Canal. ** Route goes normally through the Suez Canal or the Panama CanalSource: UNCTAD calculations, based on data from Clarksons Research and Ships are avoiding the Suez and Panama canals and seeking alternative routes. This combination translates into longer cargo travel distances, rising trade costs and insurance premiums.

Furthermore, greenhouse gas emissions are also growing from having to travel longer distances and at greater speed to compensate for the detours.

The Panama Canal is particularly important for the foreign trade of countries on the West Coast of South America. Approximately 26% of Ecuador’s trade volumes cross the canal. The share is around 22% for both Chile and Peru.

Importance of Panama Canal for selected countries

Share of trade volume, in tons, going through the Panama Canal, 2021

10%20%30%25.6%21.8%22%1.7%12%EcuadorPeruChileChinaUnited StatesSource: NCTAD estimates, based on data from the Panama Canal Authority and UNCTAD trade volume statistics. Get the data Download image

Foreign trade for several East African countries is highly dependent on the Suez Canal. Approximately 31% and 34% of foreign trade by volume for Djibouti and the Sudan, respectively, is channeled through the waterway connecting the Mediterranean Sea to the Red Sea.

Importance of Suez Canal for selected countries

Share (as a percentage) of trade volume, in tons, going through the Suez Canal, 2022

10%20%30%40%33.9%31.6%30.5%26.4%19.7%SudanYemenDjiboutiSaudi ArabiaSeychellesNote: The Suez Canal does not publish transit statistics based on countries of origin or destination. UNCTAD estimated the shares of foreign trade volumes that pass through the Suez Canal, based on origin and destination trade data (by volume, not value) sourced from MDS Transmodal. The estimated shares are for total foreign trade and not only maritime.Source: UNCTAD calculations, based on data from MDS Transmodal Get the data Download image


Soaring prices

UNCTAD underscores the far-reaching economic implications of prolonged disruptions in container shipping, threatening global supply chains and potentially delaying deliveries, causing higher costs and inflation. The full impact of higher freight rates will be felt by consumers within a year.

In addition, practically no liquified natural gas carrying vessels are using the Suez Canal at present. This is directly impacting energy supplies and prices, especially in Europe.

The crisis could also impact global food prices, with longer distances and higher freight rates potentially cascading into increased costs. Disruptions to grain shipments pose risks to global food security, affecting consumers and lowering prices paid to producers.

Climate impact

For more than a decade, the shipping industry has lowered speeds to reduce fuel costs and greenhouse gas emissions. However, disruptions in key trade routes like the Red Sea and Suez Canal, coupled with factors affecting the Panama Canal and Black Sea, are leading to increased vessel speeds to maintain schedules, which have led to higher fuel consumption and greenhouse gas emissions.

Spiking vessel sailing speed at the start of the Red Sea crisis and easing in early 2024

In knots, seven-day moving average, 7 October 2023–13 February 2024

8Oct1522295Nov1219263Dec101724317Jan1421284Feb1114.515.015.516.016.5Note: Container vessels above 13500 20-foot equivalent units (TEU)Source: UNCTAD calculations, based on data from Marine Benchmark. Get the data Download image

UNCTAD estimates that these factors could result in up to 70% rise in greenhouse gas emissions for a Singapore-Rotterdam round trip.

Pressure on developing economies

Developing countries are particularly vulnerable to these disruptions and UNCTAD remains vigilant in monitoring the evolving situation.

It emphasizes the urgent need for swift adaptations from the shipping industry and robust international cooperation to manage the rapid reshaping of global trade. The current challenges underscore the exposure of global trade to geopolitical tensions and climate-related challenges, demanding collective efforts for sustainable solutions, especially in support of countries more vulnerable to these shocks.