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The United Nations Conference on Trade and Development (UNCTAD) reported that the continued and rapid rise in container shipping costs will push global prices up by an additional 1.5% in 2022, which in turn will threaten the further recovery of the world economy.(Suntech)

In the past one and a half years, the epidemic has impacted the supply chain and trade channels, causing ocean container freight to continue to skyrocket, and the freight rates of major global routes have increased by at least 7 times. For example, the Shanghai Export Container Freight Index (SCFI), which measures the freight rate of the China-Europe route, was only less than US$1,000 per TEU in June 2020. It will rise to US$4,000 by the end of 2020, and it will be changed in July 2021. It reached the sky-high price of $7,395.

 

Reasons for global shipping prices

Since 2020, global demand for goods has rebounded rapidly as the economy gradually recovered from the blockade, but the lack of shipping capacity has always been difficult to alleviate. As countries still impose restrictions on cross-border personnel exchanges, and the epidemic has impacted employment willingness, international trade activities are facing shortages of people, ships, and containers, and the semi-paralysis pattern of the transportation industry chain with inefficient terminal loading and unloading is superimposed. Therefore, the freight rate continues. Skyrocketing.

 

The dangers of rising shipping costs

The United Nations Conference on Trade and Development pointed out in this regard that if container shipping costs continue to rise, global import prices will rise by 11% as a result, and drive overall prices to rise by 1.5% before the arrival of 2023. Some small countries that rely on material imports for survival may become the biggest victims in this process, and their prices may increase by as much as 7.5%.

Among the various commodity categories, the CIF prices of electronic products, furniture, and clothing are most affected by freight rates. Affected by the supply chain disorder, its price has risen by at least 10%.

The skyrocketing freight rate will have a huge negative impact on global trade and drag down the social and economic recovery, and developing economies will suffer even more. Until maritime activities return to normal, the troubles facing the world economy will linger.(Suntech)

 

UN recommendations

1. To restore the shipping market to the normal environment before the outbreak of the epidemic, major economies need to work together in multiple areas, and countries should strengthen cooperation.

2. It is imperative to increase infrastructure investment and expand port facilities.  

3. Use digital technology to improve transportation efficiency and facilitate trade.

To this end, the United Nations urges countries to increase investment in shipping and trade software and hardware to reduce internal friction and improve transportation efficiency. At the same time, governments of various countries are also required to closely monitor the shipping market to ensure a fair, transparent, and fully competitive business environment. The United Nations also suggested that all stakeholders in the maritime supply chain should share data and strengthen cooperation.

Although the current global epidemic has eased and the United Nations has also issued relevant measures to facilitate shipping, it is expected that shipping costs may still rise in the short term because it takes time for the economy and labor to recover.