Global recovery threatened by soaring freight rates with import prices to rise by a tenth

Thu 25 Nov 2021
Posted by: William Barns-Graham
Trade News

The recovery of the global economy is continuing to be threatened by high freight rates, which are likely to continue in the coming months, a new report has found.

A study by UNCTAD (the United Nations Conference on Trade and Development) predicts that high container freight rates could increase global import price levels by 11% and consumer price levels by 1.5% between now and 2023.

Strong demand

According to UNCTAD’s Review of Maritime Transport 2021, rates are expected to remain high due to continued strong demand combined with supply uncertainty and concerns about the efficiency of transport and ports.

“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,” said UNCTAD secretary general Rebeca Grynspan.

Container prices doubled

Global Trade Review reports the average price for a 40-foot container is $9,146.41 – which is 238% higher than a year ago.

Steve Saxon, a partner at McKinsey, said shipping rates may “normalise” in the first half of 2022.

“When we say normalise, we don’t see rates likely to fall back down to the levels seen in 2019,” he added.

Unequal effect

These high costs are not being borne equally, according to Reuters.

The UNCTAD research shows small island developing states (SIDS) are facing a 24.2% hike in import price levels, while less developed countries (LDCs) could be lumped with an 8.7% rise.

Landlocked developing countries (LLDCs) face an import price increase of just over 3%.

Brexit impact

The Office for Budget Responsibility (OBR) reports that the UK’s supply chain bottlenecks have been exacerbated by Brexit.

Research reported by Business Money has uncovered that UK online shoppers report far worse delivery experiences than other countries. Nearly two fifths (39%) claim online orders never arrived, compared to just 18% in the US, 22% in France, and 23% in Germany.

Meanwhile, the OBR chairman Richard Hughes said leaving the EU would reduce the UK’s potential GDP by about 4% in the long term on top of the pandemic effect which would reduce GDP “by a further 2%”.

“In the long term it is the case that Brexit has a bigger impact than the pandemic,” he told the BBC.