Pandemic and conflict reshaping global trade?

Wood Mackenzie, a global research and consulting group, issued a warning. If the COVID-19 pandemic highlights the need to shorten supply chains, the conflict in Ukraine underscores the importance of team building, said Peter Martin, research director at Wood Mackenzie commodities. works Commerce reliable.

Transporting goods through the Panama Canal. (Photo: ACP)

This year, energy prices have skyrocketed as the Russia-Ukraine conflict destabilizes markets and Western countries impose sanctions on the “birch country”.

The European Union (EU) has agreed to ban 90% of Russian oil imports by the end of this year. For its part, a Russian official said the country will look for other importers, with oil purchases from China and India skyrocketing this year.

Not only energy, grain exports such as wheat, are also affected. Millions of tons of wheat from Ukraine, one of the world’s largest wheat exporters, have been stuck in the domestic market, as key Ukrainian ports have been blocked.

Before the conflict, Ukraine’s Black Sea ports accounted for about 90% of the country’s grain exports.

Under the influence of the COVID-19 pandemic and the conflict in Ukraine, according to Mr. Martin, the global trading system will be restructured and the world economy will become more regionalized.

Representative Wood Mackenzie said that this is not the end of globalization, but global trade can reorganize into two or more separate blocks.

The first bloc consists of the EU, the US and its allies who have already imposed sanctions on Russia. Another group might include countries like China and India, which maintain trade with both the West and Russia.

In addition, according to Mr. Martin, trade routes by both land and sea as well as the volume of goods passing through them will be affected. Since the conflict began, shippers have avoided the Black Sea region and caused congestion at other ports in Europe as shippers had to change shipping routes.

According to Mr. Martin, any change to the global trading system will lead to some countries losing, while others benefiting. Russia is likely to be the biggest loser as it will be cut off from most of the trade in the global economy.

While some are expected to benefit certain economies, such as Southeast Asia, Latin America and Africa.

Mr. Martin said that exports will be diverted, with the need to find new markets for goods and services, and logistics services must also adapt to new trade flows.

The shutdowns in China, the world’s manufacturing hub, also contributed to the chaos of shipping and trade.

Therefore, in the coming time, freight flows may decrease depending on major East-West trade routes between China and Europe, as well as between China and the US. The change of routes may benefit some Southeast Asian countries such as Vietnam, which is currently a production base for many large companies.

On the other hand, transit points like Singapore – where ships often pass on their way to the US – can be missed as shippers head directly from Vietnam and Cambodia’s emerging manufacturing hubs to the US.

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