Global import prices expected to rise nearly 11% next year as sea freight costs soar
According to a report by the United Nations Conference on Trade and Development (UNCTAD), a spike in global container freight rates could push global consumer prices up 1.5 percent next year and import prices up more than 10 percent. China's consumer prices could rise by 1.4 percentage points as a result, while industrial production could be dragged down by 0.2 percentage points.
UNCTAD Secretary-General Rebeca Grynspan (Rebeca Grynspan) said, "Until shipping operations return to normal, the current spike in freight rates will have a profound impact on trade and undermine socio-economic recovery, particularly in developing countries."
01 Global consumer prices to rise 1.5% overall
The global economy has gradually recovered after the New Crown epidemic and shipping demand has surged, while shipping capacity has been difficult to restore to pre-epidemic levels. This contradiction has led to a continuous spike in almost ocean freight costs this year.
For example, in June 2020, the spot price of container freight index (SCFI) on the Shanghai-Europe route was less than $1,000/TEU, which had jumped to about $4,000/TEU by the end of 2020 and had soared to $7,395 by the end of July 2021. On top of that, shippers are facing shipping delays, surcharges and other fee costs.
The UN report says: "UNCTAD's analysis shows that between now and 2023, if container freight rates continue to soar, the global price level of imported products will rise by 10.6 percent and the consumer price level will rise by 1.5 percent."
The impact of soaring maritime transport costs varies from country to country, and in general, countries with smaller size and a higher share of imports in their economies will naturally be affected more. Small island developing states (SIDS) will be the most affected, with soaring maritime costs increasing consumer prices by 7.5 percentage points. Consumer prices in landlocked developing countries (LLDCs) are likely to rise by 0.6 percent. In the least developed countries (LDCs), consumer price levels are likely to rise by 2.2 percent.
02 Import prices and consumer prices are affected differently in different types of countries
By country, with the soaring cost of shipping, the U.S. consumer price index will rise 1.2 percentage points, China will rise 1.4 percentage points; by product category, the price of electronics, furniture and clothing by the biggest impact of shipping price increases, the global scope of the increase of at least 10%.
03 Economic growth and industrial production will also be affected
The analysis also said that soaring container shipping costs will also drag down economic growth in major economies. If supply chains continue to be disrupted, the report said, for every 10 percent rise in container freight rates, industrial production in the U.S. and the euro zone will decline by 1 percent and in China by 0.2 percent.
Swiss logistics giant Kuehne+Nagel said more than 600 container ships worldwide were stuck outside ports at the end of October, twice the level at the start of the year. The company late last month predicted that port and route congestion would continue at least through February next year.
04 How far has the supply chain crisis gone?
The coldest Thanksgiving in history, supermarkets limit the purchase of daily necessities: the sequence is close to the two major shopping holidays of Thanksgiving and Christmas in the United States, however, many shelves in the United States is simply not enough, originally will only happen on Christmas Eve shortage problem, actually began to ferment 2 months earlier. Global supply chain bottlenecks continue to affect the U.S. ports, highways and rail transportation, the White House even said frankly, 2021 holiday shopping season, consumers will face more serious shortage of goods.
The global supply chain is currently facing a serious crisis. Recently, in the U.S. stores, supermarkets, and even big box stores, from food, beverages, clothing to daily necessities are often out of stock. Supermarket shelves are not fully replenished, the choice of goods has become less, and stores are not sure when to replenish the goods, or even remove the shelf label. Some large supermarket chains have also reverted to a "limited purchase" policy, limiting the amount of toilet paper and other necessities that customers can buy, just as they did during the outbreak. The supply chain crisis has put pressure on the global retail and transportation industries, and some companies have recently issued a series of pessimistic financial forecasts, and the impact continues to grow.
The White House is working to get U.S. ports, railroads and highway transportation out of trouble, addressing shortages in supplies from meat to semiconductors. But U.S. officials still warn that the Christmas shopping season in 2021, fearing higher prices, and severe shortages of goods, U.S. consumers are not used to empty shelves, but everything needs some flexibility and patience.
How exactly did this crisis happen? A number of factors led to goods not being delivered to the U.S. immediately. First of all, there was a shortage of containers, which led to container prices 10 times higher than before. According to Time magazine, before the epidemic, a 40-foot container from China to the United States cost about $4,700, rising to $21,000 in August. Now to ship goods from the place of production to the United States, you must pay higher costs.
Severe port congestion on the West Coast, cargo ships take up to a month to unload: Port congestion remains a serious problem. Cargo ships lining up on the West Coast of North America take up to 1 month to dock and unload, and various consumer products such as toys, clothing, and electrical goods are out of stock. In fact, the past 1 year or so, the U.S. port of congestion has been very serious, but since July and worsened. Lack of workers: the lack of workers makes the port unloading, trucking speed is slowed down, the speed of goods replenishment is far less than the demand.
U.S. Retailers Order Early, but Goods Still Can't Be Delivered: To avoid severe shortages, U.S. retailers have been pulling out all the stops. Most companies will order early and build inventory, according to UPS's delivery platform Ware2Go, as early as August, as many as 63.2% of merchants ordered early for the holiday shopping season at the end of 2021, about 44.4% of merchants ordered more than in previous years, and 43.3% ordered earlier than in the past, but 19% of merchants are still worried that the goods will not be delivered on time.
There are even the industry's own chartered ships, looking for air freight, trying to speed up logistics. For example, Wal-Mart, Costco, Target have hired their own ships to transport thousands of containers from Asia to North America, Costco Treasurer Grandi (Richard Galanti) pointed out that currently employs three ships, each ship is expected to carry 800 to 1,000 containers. However, if only small and medium-sized retailers or emerging brands, not only can not directly negotiate with the shipping company, the cost of hiring their own cargo ships, air freight is too high, but also can not afford. The monthly cost of renting a cargo ship could be as high as $1 million to $2 million.
The global economy is only just recovering from the disruption caused by the epidemic, but is facing extreme shortages of energy, components, products, labor and transportation capacity. The global supply chain crisis does not seem to be solved signs, coupled with the surge in production costs, consumers will clearly feel the price increases, the United States this Christmas holiday is not so good.