The recent Review of Maritime Transport 2024 highlights an urgent need to bolster infrastructure, adopt low-carbon shipping practices, and address rising issues of fraudulent ship registrations.
Vulnerabilities in key shipping routes are increasingly threatening global economic stability, as well as food and energy supplies. According to the report by UNCTAD, critical passages like the Panama Canal, Suez Canal, Red Sea, and Black Sea are under significant strain. These issues stem from a mix of geopolitical conflicts, climate-related challenges, and regional tensions, all of which disrupt maritime trade.
In 2023, global maritime trade saw a modest recovery, growing by 2.4% to reach 12.3 billion tons, following a decline in 2022. However, the outlook for the future remains uncertain. Growth is expected to slow to around 2% in 2024, driven mainly by bulk commodities such as iron ore, coal, and grain. Containerized trade is predicted to improve, with a rebound of 3.5% after a sluggish 0.3% growth in 2023, yet long-term stability will depend on the industry's ability to navigate ongoing disruptions, such as conflicts in Ukraine and Middle Eastern geopolitical tensions. Though container ship capacity expanded by 8.2% in 2023, interruptions at critical points that extended routes helped offset overcapacity issues. However, a return to normal shipping patterns may lead to excess capacity again.
Challenges at Key Maritime Routes
Shipping routes across the globe have been severely disrupted, leading to delays, increased rerouting, and higher operational costs. By mid-2024, traffic through vital routes such as the Panama and Suez Canals had decreased by over 50%, attributed to low water levels in the Panama Canal due to climate change and conflicts impacting the Suez Canal. Additionally, there was a notable drop in ship tonnage passing through the Gulf of Aden and the Suez Canal, with reductions of 76% and 70%, respectively, from late 2023.
Consequently, there has been a significant rise in ships rerouting around the Cape of Good Hope, with arrivals up by 89%. While this maintains the flow of trade, it incurs higher costs, delays, and increased carbon emissions. For instance, rerouting a large container vessel on the Far East-Europe route adds around $400,000 in emissions costs per trip under the EU’s Emissions Trading System when bypassing the Suez Canal.
Longer Routes Leading to Increased Costs
Rerouted shipping paths have resulted in higher port congestion, greater fuel consumption, elevated crew wages, and increased insurance premiums and piracy risks. In 2023, global shipping distances (ton-miles) increased by 4.2%, adding to both costs and carbon emissions. By mid-2024, diversion away from the Red Sea and Panama Canal had pushed up global vessel demand by 3% and container ship demand by 12%, straining global logistics systems and supply chains.
As a result, ports in regions like Singapore and the Mediterranean are facing mounting pressure as they struggle to accommodate the rising need for transshipment services. This increased congestion adds another layer of complexity to global trade networks.
Impacts on Small Island and Vulnerable Economies
The rising costs and disruptions are hitting certain countries harder than others. Small Island Developing States (SIDS) and Least Developed Countries (LDCs) are the most affected. If the surge in container freight rates seen between late 2023 and mid-2024 continues through 2025, global consumer prices could rise by 0.6% by the end of the year. For SIDS, the impact could be more pronounced, with a possible 0.9% rise in overall prices and a 1.3% increase in processed food costs.
These nations, which rely heavily on shipping for vital imports, have seen their maritime connectivity drop by an average of 9% over the past decade, deepening their isolation. SIDS are currently ten times less integrated into global shipping networks compared to other countries.
Building Resilience Against Climate Change
The report underscores the urgent need for the maritime industry to build resilience against the increasing effects of climate change and other disruptions. Extreme weather events are becoming more common, disrupting port operations, delaying shipping, and raising costs. These challenges also have legal implications, as companies need to consider climate risks in shipping contracts to minimize disputes and maintain trade flows and insurance accessibility.
Addressing these vulnerabilities requires a coordinated effort to enhance infrastructure, services, workforce training, and technological capabilities across the industry.
Moving Toward Low-Carbon Shipping
With global emissions continuing to climb, the International Maritime Organization (IMO) has set more ambitious targets for greenhouse gas reductions. However, the pace of transition to low-carbon shipping has been slow, as the industry faces uncertainty about future fuel technologies. By early 2024, only half of the new ship orders were for vessels designed to use alternative fuels. Meanwhile, the scrapping of older, less efficient ships has slowed because high freight rates have kept demand for them elevated due to increased shipping distances.
Combating Fraudulent Ship Registrations
Another concern is the rise in fraudulent ship registrations, which undermine safety, environmental standards, and the welfare of seafarers. This issue is exacerbated by an increasing number of vessels operating outside regulatory oversight, often referred to as the "dark fleet." UNCTAD is calling for coordinated action among UN Member States and industry stakeholders to support the IMO's efforts to tackle these fraudulent practices.
Recommendations for a Sustainable Future
As the maritime industry faces these multifaceted challenges, the Review of Maritime Transport advocates for a concerted approach to address issues at maritime chokepoints, invest in green shipping technology, and improve port efficiency. Efforts to facilitate trade, combat fraudulent registrations, and monitor freight market trends are essential to building a resilient and sustainable maritime industry. Supporting vulnerable economies will be crucial to ensuring a stable global supply chain and a sustainable future.
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