Aerial view of shipping containers and cranes at Qingdao port on May 30, 2022 in Qingdao, Shandong province, China.
Han Jiajun | Visual China Corporation | beautiful pictures
First, it’s the pandemic. Then there was the Russo-Ukrainian war. With two major global crises facing each other, there could be some lasting changes in trade and supply chains, experts warn.
In particular, the war in Ukraine has made countries think about the need for more reliable trading partners.
“If the Covid-19 pandemic highlights the need to shorten supply chains, the war in Ukraine underscores the importance of having the right solutions,” said Peter Martin, research director at commodity research firm Wood Mackenzie. reliable trading partner”.
Energy prices skyrocketed this year as Russia’s onslaught in Ukraine destabilized markets and Western nations imposed sanctions on Moscow.
This week, the European Union agreed to ban 90% of Russian oil imports later this year. Moscow also previously threatened to cut off supplies in retaliation. That prompted a Russian official to say the country will find other importers Oil purchases from China and India have skyrocketed this year.
The European Union receives about 40% of its natural gas from Russian pipelines and about a quarter of that flows through Ukraine.
Exports of important grains, such as wheat, have been affected.
Millions of tons of wheat from Ukraine, one of the world’s largest wheat exporters, has been stuck in the country, unable to reach the countries that need it. That is because Russian military forces blockade the Black Sea, where important Ukrainian ports are located.
Before the war, Ukraine’s Black Sea ports accounted for about 90 percent of the country’s grain exports, according to Andrius Tursa, Central and Eastern Europe consultant at consulting firm Teneo Intelligence.
Referring to war as well as pandemics, Martin added: “These forces can lead to a lasting realignment of global trade. The global economy becomes more regionalized – supply chains shorter with ‘trusted’ counterparts.”
1. Trade block
It is “not the end” of globalization, Martin says, but global trade could reorganize into two or more “distinct blocs”.
The first bloc will include the European Union, the United States and their allies, who have imposed sanctions on Russia and are involved in isolating Russia, according to Martin. Those allies could include Britain and Japan.
Another grouping could be states that will seek to counter both sides.
“There will be a bloc of countries like China and India that maintain trade with both sanctions allies and Russia – they can get more energy and resources from Russia but need to maintain good relations with other countries. major economy in the first block, Martin said.
2. Trade routes
Martin also said: “Trade routes by both land and sea and the volume of goods passing through them will be affected.
Since the war began, shippers have avoided the Black Sea, where Russian military activity has prevented commercial shipping. That caused congestion in other ports in Europe as shippers had to change their routes.
Russia is likely to be the biggest loser because while it could turn some trade links around, it would be excluded from a large share of the global economy.
Peter Martin
Research director, Wood Mackenzie
“Russian military activity in the Black Sea, repeated attacks on Ukrainian ports and heavy fishing activity in the waters surrounding the ports make commercial shipping impossible,” Tursa wrote. in a note dated May 25.
He added that there was “no easy way” to unblock Ukrainian ports.
Ukraine is currently trying to develop alternative river and land routes to export food products to other countries.
“Although the capacity of alternative routes is expected to gradually increase, such an export is likely to be more complicated and costly than the sea route. Russia’s missile attacks are aimed at into rail infrastructure across Ukraine could further complicate logistics,” Tursa said.
You rise and lose
According to Martin, any diversion due to changes to global trade would benefit several economies, such as Southeast Asia, Latin America and Africa.
“Exports will be… be diverted, requiring new markets for goods and services to be found, and logistics to be brought in to accommodate new trade flows,” he said.
“Russia is likely to be the biggest loser because while it might turn around some trade links, it would be excluded from a large share of the global economy,” Martin said.
The shutdowns in China, the world’s manufacturing hub, also contributed to the chaos of shipping and trade.
“What we expect to see in the near term is clearly less reliance on major East-West trade routes between China and Europe, as well as China and the US. Christian Roeloffs, founder Founder and CEO of container booking company Container xChange, says five stops in China.
Routes are subject to change and could benefit some Southeast Asian countries like Vietnam, where many companies already manufacture their goods.
On the other hand, places like Singapore – where ships often pass on their way to the US – could be lost, he added, explaining that Singapore could be overlooked as shippers travel from manufacturing hubs. emerging of Vietnam and Cambodia directly to the US. West Bank.
Jason McMann, Morning Consult’s head of geopolitical risk analysis, said: “Some companies are starting to produce closer to home to limit delivery delays caused by factory closures, reduced sources of supply. supply of labor and other factors”.
They may also switch to maintaining larger inventories “as a cushion against future disruptions,” as opposed to having shorter supply chains, he added.
