Shipping costs soar, and global import prices are expected to rise by nearly 11% next year

According to a report of the United Nations Conference on Trade and development (UNCTAD), the surge in global container freight may increase global consumer prices by 1.5% and import prices by more than 10% next year. As a result, China's consumer prices may rise by 1.4 percentage points, while industrial production may be dragged down by 0.2 percentage points.

"The current surge in freight rates will have a far-reaching impact on Trade and undermine socio-economic recovery, especially in developing countries, until shipping operations return to normal," said Rebecca grynspan, Secretary General of UNCTAD.

01 Global consumer prices will rise by 1.5% overall

With the gradual recovery of the global economy after COVID-19, the demand for shipping has surged, but shipping capacity has always been difficult to recover to the pre epidemic level. This contradiction has led to soaring shipping costs this year.

For example, in June 2020, the spot price of container freight index (SCFI) of Shanghai Europe route was less than US $1000 / TEU, which had jumped to about US $4000 / TEU by the end of 2020 and soared to US $7395 by the end of July 2021. In addition, shippers face shipping delays, surcharges and other costs.

The United Nations report said: "the analysis of the United Nations Conference on Trade and development 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% and consumer prices will rise by 1.5%."

The impact of soaring shipping costs on different countries is different. Generally speaking, countries with smaller national size and higher proportion of imports in the economy are naturally more affected. Small island developing States (SIDS) are the most affected. The soaring cost of shipping will increase their consumer prices by 7.5 percentage points. Consumer prices in landlocked developing countries (lldc) could rise by 0.6%. In the least developed countries (LDC), consumer prices are likely to rise by 2.2%.

02 Import prices and consumer prices are affected differently in different types of countries

By country, with the soaring cost of shipping, the US consumer price index will rise by 1.2 percentage points and China will rise by 1.4 percentage points; By product category, the prices of electronic products, furniture and clothing are most affected by the sea price rise, with a global increase of at least 10%.

03 Economic growth and industrial production will also be affected

The analysis also said that the soaring cost of container transportation will also drag down the economic growth of major economies. The report said that if the supply chain continues to be interrupted, for every 10% increase in container freight, industrial production in the United States and the euro zone will decline by 1%, and industrial production in China will decline by 0.2%.

Kuehne + Nagel, a Swiss logistics giant, said that by the end of October, more than 600 container ships around the world had been trapped outside ports, twice the level at the beginning of the year. At the end of last month, the company predicted that the congestion of ports and routes would last at least until February next year.

04 How far is the supply chain crisis?

On the coldest Thanksgiving Day in history, supermarkets restricted the purchase of daily necessities: the timing was close to the two shopping holidays of Thanksgiving and Christmas in the United States. However, many shelves in the United States were not satisfied at all. The shortage problem that would only happen on Christmas Eve began to ferment two months earlier. Global supply chain bottlenecks continue to affect U.S. ports, highways and rail transportation. The White House admitted that consumers will face more serious shortage during the holiday shopping season in 2021.

At present, the global supply chain is facing a serious crisis. Recently, in American stores, supermarkets and even hypermarkets, food, beverages, clothing and daily necessities are often out of stock. The supermarket shelves are not fully replenished, the choice of goods becomes less, and the stores are not sure when they can replenish, or even remove the shelf labels. In addition, large supermarket chains have also resumed the "purchase restriction" policy, limiting the number of daily necessities such as toilet paper. The supply chain crisis has put great pressure on the global retail and transportation industries. Some companies have recently issued a series of pessimistic financial forecasts, and the impact is still expanding.

The White House is trying to get American ports, railways and roads out of trouble and solve the shortage of supplies from meat to semiconductors. However, U.S. officials still warn that the Christmas shopping season in 2021 may face higher prices and serious commodity shortage. Although American consumers are not used to empty shelves, they need some flexibility and patience.

How did this crisis happen? Multiple factors prevent the goods from being delivered to the United States immediately. The first is the shortage of containers. The shortage of containers has led to 10 times higher container prices than in the past. According to time magazine, the asking price of a 40 foot container shipped from China to the United States before the outbreak was about $4700, up to $21000 in August. Now we have to pay higher costs to transport goods from the place of production to the United States.

The port jam on the West Bank is serious, and it takes a month for cargo ships to unload: the port jam problem is still serious. Cargo ships lining up on the west coast of North America take up to one month to dock and unload, and various consumer products such as toys, clothing and electrical appliances are out of stock. In fact, over the past year or so, the port congestion in the United States has been very serious, but it has worsened since July. Lack of workers: the lack of workers slows down the speed of unloading and truck transportation at the port, and the speed of commodity replenishment is far lower than the demand.

U.S. retailers ordered early, but the goods still couldn't be delivered: U.S. retailers tried their best to avoid serious shortage. Most companies will order early and build inventory. According to ware2go, UPS's delivery platform, as early as August, as many as 63.2% of businesses ordered early for the holiday shopping season at the end of 2021. About 44.4% of businesses ordered earlier than in previous years, and 43.3% ordered earlier than in the past, but 19% of businesses were still worried that goods could not be delivered on time.

There are even operators who rent ships, find air transport and try their best to speed up logistics. For example, Wal Mart, Costco and target all employ their own ships to transport thousands of containers from Asia to North America. Costco treasurer Richard Galanti pointed out that at present, three ships are employed, and each ship is expected to carry 800 to 1000 containers. However, if it is just a small and medium-sized retailer or an emerging brand, it will not be able to negotiate directly with shipping companies. The cost of hiring cargo ships and air transportation by itself is too high and can not afford it. The monthly cost of renting a cargo ship may be as high as $1 million to $2 million.

The global economy is just about to recover from the chaos caused by the epidemic, but it is facing an extreme shortage of energy, components, products, labor and transportation. At present, the global supply chain crisis seems to have no sign of solution. Coupled with the surge in production costs, consumers will obviously feel the rise in prices. I'm afraid the Christmas holiday in the United States will not be so good.