UNCTAD: MARITIME SECTOR REVIEW
UNCTAD: A PRICE TO PAY There is a price to pay for bloated freight rates and other supply chain issues. Felicity Landon charts the UNCTAD position and suggestions on mitigating measures
8 “We are seeing this mess due to our lack of action over the last years” - Captain Karuppiah Subramaniam, President, International Association of Ports and Harbors
How often have we heard over the years that the public and politicians don’t understand or appreciate the importance of ports and shipping? That was largely because global supply chains (pre-pandemic) were generally swift, efficient and uninterrupted – and therefore very much unnoticed. Not any longer. We all tend to notice the things that affect us directly and a small ‘positive’ of 2021 was that consumers were able to make a connection between waiting for months for their new furniture to arrive and the dramatic images of the Ever Given jammed across the Suez Canal. As the disruption to maritime transport continues, there’s more to come – unpredictable schedules, port congestion and supply chain bottlenecks show no signs of easing – the connections between freight rates and consumer prices are about to become a whole lot clearer. The United Nations Conference on Trade and Development (UNCTAD) Review of Maritime Transport 2021 includes a chapter dedicated to the impact of the record freight rates, together with the surge in fees and surcharges. Its in-depth analysis suggests that consumer prices overall will be 1.5 per cent higher in 2023 than they would otherwise have been. Beyond that figure, the predictions are alarming. The impact will be far more for Small Island Developing States (SIDS), where prices are projected to rise by 7.5 per cent, and in Least Developed Countries (LDCs), where the increase is likely to be 2.2 per cent. UNCTAD simulated the impact of the surge in container freight rates and concluded that global import price levels will increase on average by nearly 11 per cent. For SIDS, the increase could be as much as 24 per cent. Goods manufactured through global, integrated supply chains will also gain a hefty price tag, says UNCTAD; for
36 | JANUARY/FEBRUARY 2022
example, consumers may have to pay 11 per cent more for computers and electronic goods. UNCTAD says that low-value-added items such as furniture, textiles, clothing and leather products, whose production is often fragmented across low-wage economies, well away from the major consumer markets, will also be heavily impacted; the simulation predicts consumer price increases of 10.2 per cent on these. The analysis also suggests a 9.4 per cent increase in rubber and plastic products, 7.5 per cent increase for pharmaceutical products and electrical equipment, 6.9 per cent for motor vehicles and 6.4 per cent for machinery and equipment. At the launch of the RMT in December, Rebeca Grynspan, Secretary General, UNCTAD, noted that crises such as the present one in maritime trade are often portrayed in simple terms. She mentioned a headline, “Supply chain issues will ruin Christmas”, and said: “The reality is much deeper and more worrying than that. What is at stake is not just a holiday season – it is food insecurity, it is inflation. It is a long-term challenge for developing countries in general and for SIDS in particular.” It was also pointed out at the launch that decarbonisation regulations and the maritime industry’s path to eliminating carbon will cost money, adding more to the cost of shipping. Once again, this will have more impact on SIDS. The report delves into the issue of turnround times in ports and how they vary significantly between countries, “producing economy of scale in countries with large and efficient ports but the opposite for those with low levels of digitalisation and inadequate infrastructure”, said Grynspan. “These inequalities are also behind the transport costs that some in the developing world are currently facing,” she said.
For the latest news and analysis go to www.portstrategy.com/news101
