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Global container rates have declined by 16% from their record in September, mostly due to falling rates for trans-Pacific eastbound routes
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Container rates have more than quadrupled since the start of the pandemic, with some of the biggest gains concentrated in the first three quarters of last year
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Although rates have subsided, they may remain elevated through the end of the year because some underlying supply constraints do not have immediate fixes
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If freight rates remain elevated through 2023, global import price levels and consumer price levels could rise by 10.6% and 1.5%, respectively
Global container shipping costs have dropped from their record peaks in September last year but pressures remain, according to the International Monetary Fund (IMF).
IMF in a new blog post said data shows that global container rates have declined by 16% from their record in September, mostly due to falling rates for trans-Pacific eastbound routes, the main sea link from China to the United States.
The drop indicates that strong goods demand is diminishing after the traditional peak shipping season, which is typically from August to October.
In addition, the US recently ordered some ports to expand operating hours and boost efficiency to reduce congestion and ease supply bottlenecks.
Shipping costs soared over the past year as consumers unleashed pent-up savings to buy new merchandise, while the pandemic continued to snarl the world’s supply chains.
Container rates have more than quadrupled since the start of the pandemic, with some of the biggest gains concentrated in the first three quarters of last year, the post added.
Lockdowns, labor shortages, and strains on logistics networks led to shipping cost increases and significantly lengthened delivery times, though those pressures are easing.
IMF said that although rates have subsided, they may remain elevated through the end of the year because some underlying supply constraints do not have immediate fixes.
These include backlogs and port delays, labor shortages in related occupations, supply chain disruptions moving inland, and shipping industry challenges such as the slow capacity growth and consolidation that concentrated the market power of a few carriers.
The United Nations Conference on Trade and Development (UNCTAD) projects that if freight rates remain elevated through 2023, global import price levels and consumer price levels could rise by 10.6% and 1.5%, respectively.
Higher freight rates will also result in larger increases in the final price of low-value-added products.
Moreover, the final prices of products that are highly integrated into global value chains, such as electronics and computers, will also be more affected by higher freight rates.
On the other hand, if the pandemic is controlled in the future, the demand for tradable goods might gradually decline as some service-providing sectors, such as travel and hospitality, recover.
Returning to pre-pandemic shipping rates will require greater investment in infrastructure, digitalization in the freight industry, and implementation of trade facilitation measures, IMF said.
Photo by Mariah Dalusong on Unsplash
