russia’s military aggression against Ukraine caused an increase of costs and time of transportation worldwide

russia’s military aggression against Ukraine caused an increase of costs and time of transportation worldwide

The search for alternative trade routes for Ukrainian goods quickly fulfills the requirements for land and sea transport infrastructure and services. Currently, trade partners of Ukraine have to transport many goods from distant markets. This has increased global demand for shipping and shipping costs around the world, in addition to increasing price of the goods themselves.

Higher energy costs have pushed up the price of marine bunkers, increasing shipping costs for all sectors. By the end of May 2022, the global average price of very low sulfur fuel oil (VLSFO) had increased by 64 percent since the beginning of the year.

Less transportation of grain over long distances leads to higher food prices. Grain prices and shipping costs have been rising since 2020, but the war in Ukraine has exacerbated this trend and reversed the temporary decline in shipping prices.

The UNCTAD report reads that between February and May 2022, the price paid to transport bulk cargo such as grain increased by almost 60%. The accompanying increase in grain prices and freight rates will lead to a 3.7% increase in consumer food prices worldwide.

In March, Ukraine became the largest supplier of iron ore to the European Union, filling the gap left by russian materials. Sales volumes reached 2.1-2.3 million tons per month comparing to the usual 1.4-1.5 million tons. According to the GMK Center, Ukrainian iron ore then accounted for 30% of Europe’s needs. But exports from Ukraine fell 23% in June after a number of iron ore facilities in the country suspended operations due to ongoing transportation problems caused by Russia’s military aggression against Ukraine. The volume of iron ore exports to the EU fell to 0.9-1.0 million tons in recent months, which is half as much as at the beginning of the year. Ukrainian iron ore is supplied to the Czech Republic, Poland, Slovakia, Austria, Germany and other EU countries. The leading metallurgical enterprises of Europe, in particular ArcelorMittal, US Steel, Voestalpine, Thyssenkrupp, make steel from Ukrainian iron ore. European steel producers are facing with the question of replacing lost Ukrainian iron ore. Such a transition will be expensive for the European manufacturer and delivery time will increase significantly, at least 2 months from the countries of South America, compared to 8-14 days of transportation from Ukraine.

As a result, rising raw material and transportation costs mean higher prices for consumers. UNCTAD, in its report on global maritime trade for June, calls for urgent action to open Ukrainian ports to international shipping. This is a necessary condition for ensuring sustainable global trade. It is necessary to constantly strengthen the cooperation of all international stakeholders of the transportation sector in order to create the necessary conditions for this.

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