The Ukraine war has boosted the cost of transporting dry bulk such as grains by nearly 60%, stifling trade and shipping in the Black Sea region, an updated United Nations report says.
The increase in grain prices and freight rates has led to a near 4% increase in consumer food prices globally, with almost half the impact coming from higher shipping costs, according to the UN Conference on Trade & Development (Unctad).
Early in the war, the agency warned of the risk of famine and political destabilisation caused by blocking grain trades.
Russian and Ukraine account for 53% of global trade in sunflower oil and seeds, and 27% in wheat. Thirty-six countries import more than half of their wheat from Russia and Ukraine, according to Unctad.
It said the search for alternative trade routes has rapidly increased the demands on maritime transport infrastructure and services: “Grain prices and shipping costs have been on the rise since 2020, but the war in Ukraine has exacerbated this trend and reversed a temporary decline in shipping prices.
“Between February and May 2022, the price paid for the transport of dry bulk goods — such as grains — increased by nearly 60%.”
Before the war, the report said estimates projected 3% growth in global seaborne grain exports, but they are now projected to shrink by 3.8% in 2022.
Global shipments of fertiliser, and its inputs such as potash, are projected to drop by 7% this year.
However, the falls will be partly offset by increased shipments from other suppliers.
Brazil is expected to increase its wheat and coarse grain exports by 37% this year, and supplies from the European Union and the UK are set to grow by 8%.
Soybean exports are expected to rise from Argentina, Brazil and the US. In the medium term, Australia, Brazil and the US can be expected to compensate for reduced grain exports to North Africa and the Middle East, Unctad said.
Higher energy costs arising from the war have also led to a rise in marine bunker prices, which has been a partial cause of the higher shipping costs.
Cargo destined for Russia and Ukraine is piling up at ports, including Hamburg, Rotterdam, Constanta and Istanbul, with shippers facing delays and a likely increase in detention and demurrage charges.
All these factors are driving costs upward as pressure is added to warehousing and storage capacity.
Unctad said its simulation concludes that the high container freight costs observed in 2021-2022 will lead to an additional increase in consumer prices of 1.6%, and that global import prices will rise on average by 11.9% as a result of sustained freight rate increases.