Soaring shipping rates to push global inflation up 1.5%: UNCTAD

The global economic recovery is threatened by high freight rates, which are expected to continue in the coming months, according to the United Nations Conference on Trade and Development (UNCTAD) “Maritime Transport Review 2021” released Thursday.

UNCTAD analysis reveals that the current surge in containerized freight rates, if sustained, could increase world import price levels by 11% and consumer price levels by 1.5% d ‘by 2023.

“The current surge in freight rates will have a profound impact on trade and undermine socio-economic recovery, especially in developing countries, until shipping operations return to normal,” said the Secretary-General of UNCTAD, Rebeca Grynspan.

Shipping companies have benefited from skyrocketing freight rates, the report notes, as surcharges, fees and tariffs were temporarily further increased after the container ship “Ever Given” blocked the Suez Canal in March 2021 .

Rising container shipping costs have been a challenge for all traders and supply chain managers, the report says, but especially for smaller shippers, who may be less able to absorb the additional expense and are at a disadvantage when negotiating rates and booking space. on ships.

“In the face of these cost pressures and lasting market disruption, it is increasingly important to monitor market behavior and ensure transparency when it comes to setting prices, fees and charges. supplements, ”the report recommends.

It calls on governments to monitor markets to ensure a fair, transparent and competitive business environment, and recommends more data sharing and closer collaboration between stakeholders in the maritime supply chain.

National competition authorities therefore need the ability to monitor trends in freight rates, fees and charges, he said.

“Returning to normal would involve investing in new solutions, including infrastructure, freight technology, and measures to digitize and facilitate trade,” Grynspan said.

The trigger for soaring freight rates and costs

Demand for goods increased in the second half of 2020 and into 2021, with consumers spending their money on goods rather than services during lockdowns and pandemic restrictions, according to the report. Working from home, shopping online, and increasing computer sales have all placed unprecedented demand on supply chains.

This strong variation in containerized trade flows has been faced with capacity constraints on the supply side, including the carrying capacity of container ships, container shortages, labor shortages, continued restrictions. of Covid-19 in port areas and congestion in ports.

This mismatch between growing demand and shrinking supply then led to record containerized freight rates on virtually all container trade routes.

Supply chains will be affected by the rising costs of maritime trade. Low value-added items produced in small economies, in particular, could experience a severe erosion of their comparative advantages.

In addition, concerns abound that the sustained rise in shipping costs will not only weigh on exports and imports, but could also hurt the recovery of global manufacturing.

The report says high and sustained rates are already affecting global supply chains.

Coping with high freight rates

Improving the quality of port infrastructure would reduce the average costs of maritime transport worldwide by 4.1%, while improving the costs of trade facilitation measures would reduce costs by 3.7% and 4, 4% thanks to the improvement of the connectivity of liner shipping.

The impact of the Covid-19 pandemic on maritime trade volumes in 2020 has been less severe than initially expected, but its ripple effects will be significant and could transform maritime transport, according to the report.

UNCTAD predicts that the annual growth in maritime trade between 2022 and 2026 will slow to 2.4%, down from 2.9% over the past two decades.

The report shows that maritime trade contracted 3.8% in 2020, reflecting an initial shock, but rebounded later in the year and is expected to rise 4.3% in 2021. The medium-term outlook for maritime trade remain positive, but is subject to “increasing risks and uncertainties”.

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