Surge in freight charges to hit consumers hard next year


Operations inside the Lamu Port in Lamu County as the fifth cargo ship with 100 ships is received on 21st August 2021. PHOTO | KEVIN ODIT | NMG

Consumers in developing countries will be hit hard by increased cost of goods next year on account of a sharp rise in freight charges.

United Nations Conference on Trade and Development (Unctad), says global import price levels could increase by 11 percent and consumer price levels by 1.5 percent between now and 2023 unless the bottle-necks surrounding the marine industry are addressed urgently.

The least developed countries will be hit hard by the crisis with consumer prices expected to go up by 2.2 percent in these nations.

“Global consumer prices will rise significantly in the year ahead until shipping supply chain disruptions are unblocked and port constraints and terminal inefficiencies are tackled,” said Unctad.

In its report on Review of Maritime Transport 2021, Rebeca Grynspan, Unctad secretary-general, said the current surge in freight rates will have a profound impact on trade and undermine socio-economic recovery, especially in developing countries, until maritime shipping operations return to normal.

“Returning to normal would entail investing in new solutions, including infrastructure, freight technology, and digitalisation and trade facilitation measures,” she said.

The agency said the medium-term outlook remained positive but it predicts the annual growth will slow to 2.4 percent between 2022 and 2026, compared with 2.9 percent over the past two decades.

Global supply chains faced unprecedented demand from June last year as consumers spent more on goods than on services at the height of Covid-19 containment measures that was imposed by different countries.

But the increase in demand hit several constraints, including container ship-carrying capacity, container shortages, labour shortages, congestion at ports, and Covid-19 restrictions. The mismatch led to record container freight rates “on practically all container trade routes,, according to the report.

The Covid-19 impact on maritime trade volumes last year, Unctad says, was less severe than initially projected.

Maritime trade contracted by 3.8 percent to 10 billion tonnes in 2020 and is projected to increase by 4.3 percent next year.

Supply-chain experts say the high rates leave many shippers, particularly those with relatively low-value goods, with an option of paying a premium for containers and passing the costs on to their customers or retreat from overseas markets.

While the climbing rates are driving up carriers’ profits, shippers continue to struggle with the ever-increasing costs. All major trade corridors have seen rate growth during the first seven months of 2021 and fresh records continue to bet set.

In Kenya, freighters are feeling the impact as they grapple with delays in deliveries of goods to their customers because of the prevailing shortage globally.

The move has seen consumers wait longer for their deliveries to be made even as they cope with the high cost of goods that are in tandem with the increasing fee of shipping.

A global surge in demand for certain goods during the pandemic has upended normal trade flows, stranding empty cargo containers and leading to bottlenecks.

As a result, shippers have been forced to pay a premium in order to get shipping containers as the world continues to witness a shortage that has seen freight charges continue on an upward trajectory.