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Around 80% of the world’s traded goods are transported in shipping containers across the sea.
We basically depend on those 12-metre-long containers as much as we do on bread and butter for they help us import and export all our modern conveniences and excesses.
When the Suez Canal mess occurred, and worst of all, when COVID-19 disrupted supply chains, the world realised just how crucial the maritime container trade is to the global economy.
Overall, the world has had to adapt to these effects on the supply chain causing consumer prices to skyrocket.
As the Chart of the Week shows via CNBC Africa, studying data from 143 countries over the past 30 years, shipping costs are intertwined with inflation levels around the world:
The result of those challenges was that the cost of shipping a container on the world’s transoceanic trade routes increased seven-fold in the 18 months following March 2020, while the cost of shipping bulk commodities spiked even more.
Data has shown that when freight rates double, inflation generally picks up by about 0,7 percentage points. These effects are quite persistent, too, peaking after a year and lasting up to 18 months.
It is then implied that 2021’s increase in shipping costs may have increased inflation by about 1,5 percentage points for 2022.
Considering the war in Ukraine, global inflation will be further exacerbated as global shipping costs are likely to remain high.
This is not at all good news, and we can already see our local prices being affected left, right, and centre:
…higher shipping costs hit prices of imported goods at the dock within two months, and quickly pass through to producer prices—many of whom rely on imported inputs to manufacture their goods.
But the impact on the prices consumers pay at the cash register builds up more gradually, hitting its peak after 12 months. This is a much slower process than what is seen after a rise in global oil prices, which drivers feel at the pump within a couple of months.
For now, we sit and wait until we feel the full impact of another blow to the wallet.
In terms of South African businesses in the import and export game, it’s also a period of worry.
Luckily, the country’s largest private-owned logistics company, Berry & Donaldson, has been helping our importers and exporters navigate the labyrinth that is international freighting for over half a century.
They’ll do the hard yards – handling airlines, shipping companies, customs-related processes, and more – to get you the best price possible while you focus on the business side of things.
While global crises and how they affect rising shipping costs and inflation is mostly out of one’s control, doing business with the right logistics company is, thankfully, still a choice.
[source:cnbcafrica]
