Global trade must face up to drought threat
Droughts, low river levels already creating billions in economic damage and could worsen
The World Economic Forum (WEF) has highlighted the threat to global supply chains from increasing droughts, which could make key riverine transit routes impassable and threaten a wide range of goods.
According to the World Meteorological Organisation, economic damage as a result of droughts increased by 63% in 2021 compared with then 20-year average.
Ninety percent of products move around the world using oceans and waterways. Severe droughts in the summer of 2022 made key international trade routes impassable, affecting the Mississippi, Yangtze and Rhine rivers.
The Rhine River is used to transport more than 300m tonnes of goods annually. The low water levels in the summer of 2022 meant that some vessels were forced to sail with just 25% of their full cargo capacity. This was believed to be Europe’s worst drought for 500 years.
Meanwhile, the southwest of the USA is experiencing its driest period for 1,200 years with a 22-year drought. The Mississippi is used to transport more than 450m tonnes of cargo annually. Some routes had to close in October 2022 due to low water levels. Following a dredging operation to deepen shipping channels, more than 2000 barges were able to continue their journey. The impact on the supply chain, and economic damage generally was estimated at $20bn, according to AccuWeather.
An even more enormous 3bn tonnes of cargo is transported along the Yangtze River in China annually. Low rainfall and high temperatures which increased evaporation levels led to August 2022 water levels in the drainage area of the Yangtze River at 60% below average water levels for that month, their lowest level since 1865. This caused both hydropower shortages and shipping problems.
More extreme droughts are forecast with a United Nations (UN) report predicting that 75% of the world’s global population could be affected by drought by 2050. This has very serious implications for global trade.
According to the UN “Drought in Numbers” report, droughts have increased by nearly 30% since 2000. Options to alleviate transport problems are limited. The German government is considering following the US example on the Mississippi and deepening a shallow section of the Rhine.
The German Institute of Development and Sustainability, in a recent report, suggested “investing in better early warning systems for low water levels, [and] shifting away from [a] reactive and crisis-based approach towards a more proactive and risk-based drought management approach.”
The UN report paints a worrying picture for the future: “Recent scientific studies on drought point to a precarious future for the world and all nation states, far beyond just those in arid regions. This wake-up call is louder and clearer than ever before.”