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UN Warns of Higher Prices In 2022 Due to Rising Freight Rates

UN Warns of Higher Prices In 2022 Due to Rising Freight Rates

November 22, 2021
November 22, 2021
Operations going on at the Port of Lamu in Kenya. The UN has warned that unless the current bottlenecks facing the marine industry are resolved, consumers will have to pay more for goods next year. Photo:KPA

Consumers are staring at a higher cost of goods next year on the back of the soaring freight rates unless the bottle-necks surrounding the marine industry are resolved quickly, the United Nations has warned.

The UN’s trade and development agency- 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.

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

The New York-based agency says a surge in container freight rates could impact negatively on consumer prices if the current chain disruption is not contained.“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.

According to Unctad, the Covid-19 impact on maritime trade volumes last year 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.