Rising freight costs will increase global import prices by 11%

The United Nations Conference on Trade and Development ( UNCTAD) stated in its recently released " Review of Maritime Transport 2021" that high global shipping rates are likely to continue in the coming months and will continue to affect economic recovery .

UNCTAD analysis shows that if the current surge in container freight rates continues, global import prices could rise by 11% and consumer prices could rise by 1.5% between now and 2023. "Until maritime operations return to normal, the current surge in freight rates will have a profound impact on trade and undermine socio-economic recovery," said Rebecca Greenspan, Secretary-General of UNCTAD .

“Returning to normality will require investments in new solutions, including infrastructure, freight technology and digitalization, and trade facilitation measures,” she said.

The report said demand for goods surged during the second half of 2020 and 2021 as consumers spent money on goods rather than services during the pandemic lockdowns and restrictions. Working from home, online shopping and increased computer sales have all placed unprecedented demands on the supply chain.

The surge in container trade flows has encountered supply-side capacity constraints, including container ship capacity, container shortages, labor shortages, epidemic restrictions across port regions, and port congestion.

The mismatch between surging demand and reduced supply capacity has led to record container freight rates on almost all container trade routes.

The report said persistently high interest rates were already affecting global supply chains, noting that Europe, for example, had been facing shortages of consumer goods such as household goods, bicycles, sporting goods and toys imported from Asia.

According to the report, the surge in container freight rates will increase production costs, especially for low value-added products, whose comparative advantages may be severely eroded. For example, furniture, textiles, clothing and leather products, rubber and plastic products will see a 9.4% increase in prices . The production of these items is often dispersed in low-wage economies far from major consumer markets; UNCTAD predicts that consumer prices will rise by 10.2% as a result .

In addition, there are widespread concerns that continued rising transportation costs will not only affect imports and exports, but will also undermine the recovery of the global manufacturing industry. The report said that American manufacturers mainly rely on industrial supplies from China and other East Asian economies, so continued cost pressures, disruptions and delays in container shipping will hinder production , and industrial production in the United States and the eurozone will further decline .

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