Ever-increasing freight rates are set to impact consumer prices until 2023 and drive up the cost of intermediate goods, according to the United Nations Conference on Trade and Development (UNCTAD).
UNCTAD’s Review of Maritime Transport 2021 said some freight rates had risen seven-fold and global consumer prices were forcecast to rise 1.5% between now and 2023. Imports are predicted to increase 11.9% as a result of freight costs.
The report said a 10% global increase in container freight rates, coupled with supply disruption, was expected to decrease industrial production in the United States and Europe by more than 1%.
Higher freight rates are also expected to push up production costs by 1.4%, the cost of capital goods by 3.3%, and intermediate product prices by 3.1%, the report found.
UNCTAD secretary general Rebeca Grynspan said: “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.
“[This] would entail investing in new solutions, including infrastructure, freight technology and digitalization, and trade facilitation measures,” she said.
Global freight rates have soared due to increased demand following lockdowns to tackle the Covid-19 pandemic, container shortages and port congestion.
The report noted freight rates between Shanghai and Europe have risen from less than $1,000 per container in June 2020 to $7,395 by the end of July 2021.
Freight rates have already affected global supply chains, the report said, noting Europe has faced shortages of consumer goods imported from Asia including home furnishings, bicycles, sports goods and toys.
Consumer electronics and computer device prices could rise by as much as 11.4% due to higher freight costs, with furniture, textiles and leather products set to increase by over 10%.
The report said increased investment in port infrastructure could cut world maritime transport costs by 4.1%, while costs would be reduced by 3.7% by better trade facilitation measures, and by 4.4% with improved liner shipping connectivity.
The report said: “Covid-19 emphasised the importance of ensuring continuity in supply chains and the need for them to become more resilient, responsive, and agile.”
It recommended businesses achieve this by diversifying supply chains, backing up production sites, increasing inventory of critical products, allowing for redundancy across suppliers, and improving end-to-end transparency.
The 10 consumer products most affected by higher freight costs (percentage price rise to 2023):
Computer, electronic and optical products – 11.4%
Furniture and other manufacturing – 10.2%
Textiles, apparel and leather products – 10.2%
Rubber and plastic products – 9.4%
Basic pharmaceutical products and pharmaceutical preparations – 7.5%
Electrical equipment – 7.5%
Other transport equipment – 7.2%
Motor vehicles, trailers and semi-trailers – 6.9%
Fabricated metal products, except machinery and equipment – 6.8%
Machinery and equipment – 6.4%