Ongoing disruption to global shipping routes has the potential to cause significant inflation, according to the latest UN Conference on Trade and Development (Unctad) report.
The report cited the ongoing issues with shipping routes in the Suez Canal, Panama Canal and Black Sea.
Additionally, the potential for shipping to have to be diverted away from those routes as a consequence of geo-political events could lead directly to “higher costs and inflation. The full impact of higher freight rates will be felt by consumers within a year”.
The specific issue in the Panama Canal relates to drought in the region.
Transit levels in the Suez Canal are 42 per cent below peak levels, while in the Panama Canal, it is 47 per cent below peak levels.
The report stated the impact of higher shipping costs could consequently lead to higher prices in other parts of the global economy.
The report stated: “Energy prices are surging as gas transits are discontinued and directly impacting energy supplies and prices, especially in Europe.
"The crisis could also potentially impact global food prices, with longer distances and higher freight rates potentially cascading into increased costs. Disruptions in grain shipments from Europe, Russia, and Ukraine pose risks to global food security, affecting consumers and lowering prices paid to producers.”
David.Thorpe@ft.com
