Shipping routes and inflation
Although cost increases persist on routes from northern Europe to Asia, they are starting to fall in the opposite direction. Even so, the skyrocketing shipping costs in recent months threaten runaway inflation.
The armed response to the ongoing genocide in Gaza launched last November by Ansar Al-lah, the Islamist resistance group better known as the Houthis and operating in Yemen, sent shipping costs soaring.
During the first three weeks of the attacks on Red Sea ships bound for the Suez Canal, the Shanghai Containerized Freight Index (SCFI), which tracks shipping rates for goods imported from China, increased by more than 160%. The price increases had been gaining momentum, especially after the US and UK retaliation against the Houthi forces.
On the one hand, ships have to cover longer routes avoiding the Red Sea and the Suez Canal, but shipping companies have also taken advantage of the situation to update prices upwards. In any case, new ships are increasing supply and reducing costs, so freight rates for routes between Asian countries and Europe have started to fall.
According to the Freightos Global Container Freight Index, the cost of a 60 cubic metre container to transport goods from China and East Asia to Northern Europe has gone from 5,492 dollars on 19 January to 5,455 dollars on 26 January, a drop of 0.7%. The price decline is most evident in the Asia to Mediterranean trades, where freight rates have fallen by 4.8 per cent from $6,772 to $6,448 on the same dates. However, increases of 8 per cent on routes from northern Europe to Asia and 5.5 per cent from the Mediterranean to the Asian continent persist.
Inflation control in the balance
The coordinator of the Asia-Pacific working group of the Exporters’ Club, Ramón Gascón, warns EFE that “prices have not yet been passed on to the consumer, but this will eventually happen if the situation drags on”. Logistics disruption threatens to destabilise assembly lines in industries that are particularly sensitive to transport delays, such as the automotive sector, and raise prices for consumers.
Likewise, the experts consulted by EFE warn that the delay in the arrival of key products for the food sector, such as palm oil, maize and rice, could contribute to price rises at a time when Europe and much of the world have been implementing measures to try to contain inflation for months.
Given that, according to a recent IMF report, import prices account for 40% of the overall changes in inflation that have affected European consumers over the last two years, it cannot be ruled out that this latest cost increase will be passed on to the final consumer.
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