Rising shipping costs will impact on business and consumers

  • 07/07/2021
  • Spain

Global trade, both import and export, is being threatened by rising shipping prices. These prices have tripled in recent months.

What are the reasons for this price increase? We could reduce the main reasons for this price increase to these points:

•    The shortage of containers: due to the standstill in the first months of the pandemic, shipping companies took the opportunity to "scrap" many of their older containers. The increase in online shopping in the same period began to revive demand. The same happened in the industry after the relaxation of covid-19 preventive measures. These developments have weighed down maritime transport and it is now noticeable that there are not enough containers to meet the almost fully reactivated demand.  
•    Port saturation: the increase in demand and the implementation of stricter security protocols during loading and unloading activities have led to an increase in processing times and, therefore, to an increase in the number of transports that the ports have been able to absorb efficiently. 
•    Reduction of routes: during the pandemic, less freight was requested (especially in the industrial area) due to the stoppage of many industries, which led to a reduction of routes and chartered vessels. This supply, despite the reactivation of demand, has not increased to the same extent, so there is a mismatch between supply and demand. 

It is estimated that 80% of the products that are consumed (and the raw materials of which they are composed) have reached their final destination via freight, so the main consequence will be the repercussion of this increase in the prices of products or the materials that require this means of transport to reach their destination, thus increasing inflation.

A review of this year confirms that it is not only transport that has raised prices, but also raw materials have set record highs. The reactivation of the Chinese economy after Covid-19, the staggering effect with the slight drop in prices during the confinements and the upturn in demand have intensified the imbalance.

This price increase may be an obstacle to the recovery of trade activity globally. In the second half of this year it is possible that we will see these increases soften as supply and demand stabilize. Until that moment it remains to be seen how this will play out in the selling prices of products.

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