UN names threat that may cause global spike in prices
The recovery of the global economy is in jeopardy due to the surge in container shipping rates, which are likely to continue well into 2022, the UN’s trade and development agency, UNCTAD, said on Thursday.
“The current surge in freight rates will have a profound impact on trade, and undermine socioeconomic recovery, especially in developing countries, until maritime shipping operations return to normal,” UNCTAD Secretary-General Rebeca Grynspan explained, as cited by Reuters.
In its Review of Maritime Transport 2021, published on November 18, UNCTAD stated that, at its current level, the global rise in container freight rates could increase import price levels by 11%. Consumer price levels would also subsequently rise, by an average of 1.5% between now and 2023.
According to the review, however, “the impact of the high freight rates will not be evenly spread, even within Europe, and will be generally greater in smaller economies.” Small island nations that greatly depend on deliveries by sea are expected to suffer the most. They “could see import prices increase by 24% and consumer prices by 7.5%.” Also, while consumer prices in the US and China are expected to rise by 1.2% and 1.4% respectively, smaller ‘import-open’ states such as Estonia and Lithuania would see a nearly 4% increase.
According to UNCTAD, supply chains, which are already impacted by high shipping rates, will be affected further throughout next year.
Prices are expected to rise unevenly on different products. For instance, low-value-added items would be strongly affected, such as furniture, textiles, clothing, and leather products, as production of these goods is often spread across low-wage economies far from major consumer markets. Prices in the sector are to soar at least 10%.
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The agency also predicts a 9.4% surge in rubber and plastic products, a 7.5% rise in pharmaceutical industry and electrical equipment, 6.9% in motor vehicles and 6.4% in equipment and machinery.
“In the face of these cost pressures and lasting market disruptions, it is increasingly important to monitor market behavior and ensure transparency when it comes to setting rates, fees and surcharges,” the agency stressed, urging all parties to the maritime supply chain, including container lines, ports, inland transport providers, customs and shippers, to “work together to share information and make maritime transport more efficient.”
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