In March, the "Ever Given" giant ship blocked the Suez Canal for nearly a week, triggering another surge in container spot freight rates, and this price finally started from the historical high during the COVID-19 pandemic. Fall back.

Freight is an important part of trade costs. Therefore, as the global economy is struggling to recover from the worst global crisis since the Great Depression, new interest rate hikes have brought new challenges to the global economy.

Jan Hoffmann, head of the trade and logistics department of the United Nations Conference on Trade and Development, said: "The'Long Grant' incident reminded the world of how much we rely on shipping. About 80% of the goods we consume are shipped by shipping. , But it’s easy to overlook this."

Container freight rates have a special impact on global trade, because almost all manufactured goods (including clothes, medicines and processed foods) are transported in containers.

Hoffman said: "This will affect most consumers. Many companies will not be able to withstand the impact of higher interest rates and will choose to pass it on to their customers."

UNCTAD's new policy brief discusses the reasons for the surge in freight rates during the epidemic and the measures that must be taken to avoid similar situations in the future.

Shipping during the epidemic: Why do container freight rates continue to soar?

Unprecedented shortage

Contrary to expectations, the demand for container transportation has increased during the epidemic and has rebounded rapidly from the initial slowdown.

UNCTAD’s policy brief: “The changes in consumption and shopping patterns caused by the epidemic, including the surge in e-commerce and blockade measures, have actually led to an increase in the import demand for manufactured consumer goods, and a large part of it is through containers. Transported."

As some governments eased blockades and approved national stimulus plans, and companies hoard supplies in response to a new wave of epidemics, maritime trade flows have further increased.

UNCTAD's policy brief: “Demand has grown stronger than expected, and the existing shipping capacity cannot meet its needs. This is unprecedented. Carriers, ports and shippers were caught off guard. Empty boxes were left where they were not needed. There is no plan to relocate."

The root causes are complex, including changes and imbalances in trade patterns, carrier capacity management at the beginning of the crisis, and ongoing delays due to the epidemic related to transportation connections such as ports.

The rapid economic development of developing countries

The biggest impact on freight rates is the trade routes to developing countries, where consumers and companies are less affordable.

Currently, South America and West Africa have higher tariff rates than any other major trading area. For example, by the beginning of 2021, freight from China to South America has risen by 443%, while freight from Asia to the eastern coast of North America has risen by 63%.

Part of the reason is that the routes from China to South America and African countries are usually longer. These routes require more ships each week, which means that many containers are also "cocked" on these routes.

Policy briefing: "When empty containers are scarce, importers in Brazil or Nigeria must not only pay the transportation costs of all imported containers, but also the inventory costs of empty containers."

Another factor is the lack of return goods. South American and West African countries import more manufactured products than they export. Therefore, it is costly for carriers to ship empty containers back to China over long distances.

Shipping during the epidemic: Why do container freight rates continue to soar?

How to avoid future shortages

To help reduce the likelihood of similar situations in the future, UNCTAD’s policy brief highlights three issues that require attention: advancing trade facilitation reforms, improving maritime trade tracking and forecasting, and strengthening national competition authorities.

First, policymakers need to implement reforms to make trade easier and cheaper. Many of these reforms are reflected in the Trade Facilitation Agreement of the World Trade Organization.

By reducing the physical contact between shipping industry workers, this reform that relies on modern trade procedures will also make the supply chain more resilient and better protect employees.

Soon after the outbreak of the new crown epidemic, the United Nations Trade and Development Council provided a 10-point action plan to keep ships, ports open, and trade unblocked during the epidemic.

The organization has also joined hands with the United Nations regional committees to help developing countries quickly implement such reforms and respond to the trade and transportation challenges posed by the epidemic.

Second, policymakers need to increase transparency, encourage cooperation in coastal supply chains, and improve monitoring methods for port calls and liner arrangements.

In addition, governments must ensure that competition regulators have the resources and expertise needed to investigate potential abuses in the shipping industry.

Although the destructive nature of the epidemic is at the core of the shortage of containers, some of the carrier’s strategies may have delayed the relocation of containers at the beginning of the crisis.

Providing the necessary supervision is more challenging for the regulatory authorities in developing countries, which often lack the resources and expertise in international container shipping.