Supply Chain and Transport

IMF: Global shipping costs are easing but pressures remain

Container ships are loaded at a container terminal in the harbor amid the outbreak of (COVID-19) in Hamburg, Germany.

Global shipping pressures remain, despite costs moderating. Image: REUTERS/Fabian Bimmer/File Photo

Parisa Kamali
Economist in the External Policy Division, IMF
Share:
Our Impact
What's the World Economic Forum doing to accelerate action on Supply Chain and Transport?
The Big Picture
Explore and monitor how Supply Chain and Transport is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

Supply Chain and Transport

  • Pressures are easing after many pandemic-related factors caused shipping costs to increase significantly over the past year.
  • Strong goods demand is diminishing after the traditional peak shipping season, which is typically from August to October, causing shipping rates to decrease.
  • Returning to pre-pandemic shipping rates will require greater investment in infrastructure, digitalization in the freight industry, and implementation of trade facilitation measures.

Shipping costs soared over the past year as consumers unleashed pent-up savings to buy new merchandise while the pandemic continued to snarl the world’s supply chains. Container rates have more than quadrupled since the start of the pandemic, with some of the biggest gains concentrated in the first three quarters of last year.

Lockdowns, labor shortages, and strains on logistics networks led to shipping-cost increases and significantly lengthened delivery times , though those pressures are easing. Our Chart of the Week shows how global container rates began to pull back from their record in September and have since declined by 16 percent, mostly due to falling rates for trans-Pacific eastbound routes, the main sea link from China to the United States.

a chart showing how global shipping rates have fallen from their September peak.
The state of global shipping rates, which have fallen from their September peak. Image: IMF

The drop indicates that strong goods demand is diminishing after the traditional peak shipping season, which is typically from August to October. In addition, the US recently ordered some ports to expand operating hours and boost efficiency to reduce congestion and ease supply bottlenecks.

Have you read?

Although rates have subsided, they may remain elevated through the end of the year. Some underlying supply constraints do not have immediate fixes: backlogs and port delays, labor shortages in related occupations, supply chain disruptions moving inland, and shipping industry challenges such as the slow capacity growth and consolidation that concentrated the market power of a few carriers. On the other side, if the pandemic is controlled in the future, the demand for tradable goods might gradually decline as some service-providing sectors, such as travel and hospitality, recover.

Higher shipping costs and goods shortages are expected to boost merchandise prices. The United Nations Conference on Trade and Development (UNCTAD) projects that if freight rates remain elevated through 2023, global import price levels and consumer price levels could rise by 10.6% and 1.5%, respectively. This impact would be disproportionately larger for small, developing islands which heavily rely on imports that arrive by sea.

Discover

What is the World Economic Forum doing on trade facilitation?

Higher freight rates will also result in larger increases in the final price of low-value-added products. Smaller developing economies that export many of these goods could become less competitive and face difficulties with their economic recoveries. Moreover, the final prices of products that are highly integrated into global value chains such as electronics and computers will also be more affected by higher freight rates.

Returning to pre-pandemic shipping rates will require greater investment in infrastructure, digitalization in the freight industry, and implementation of trade facilitation measures.

Loading...
Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Supply Chain and TransportTrade and Investment
Share:
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

Charting the course: How the shipping industry is adapting to tensions in the Red Sea

Zera Zheng, Rico van Leuken and Lars Karlsson

February 23, 2024

About Us

Events

Media

Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum