Analysis-Shipping costs are another concern for inflation watchers to navigate

As with the Coronavirus pandemic, a global shipping crisis is expected to continue increasing prices until 2023, causing traffic delays and stifling economic growth.

Shipping is rarely taken into account by economists when they calculate inflation and GDP, and companies worry more about raw materials and labor costs than transportation. But that might be changing.

Based on Freightos FBX index, shipping costs for 40-foot containers (FEU) dropped 15% from record highs in September. Prior to the pandemic, the same container cost just $1300 instead.

In a world that carries 90% of its goods by sea, this could exacerbate global inflation, which is already problematic.

Sand, chief analyst at Xeneta, a freight rate benchmarking platform, doesn't expect container shipping costs to normalize until 2023.

Sand said this indicates that the higher cost of logistics is not a passing phenomenon. The impact of shipping on overall prices, however small, is more significant than it has ever been, and it is likely to cause a permanent rise in prices going forward.

To Ship TopAlpha In March, a six-day blockage of the Suez Canal caused a spike in international shipping costs. As a result, vessel-hiring markets were further constrained as uncertainty about future fuel and emissions regulations had driven orders for new ships to record lows.

A surge in consumer demand followed after the Coronavirus lockdowns, whereas dockyards were struggling with labor shortages related to COVID.

In early November, 11% of the global loaded container volume was stuck in logjams, down from the peak levels in August, but well above the pre-pandemic 7%, according to Berenberg analysts.

BACKLOG UNTIL 2023

In October, Los Angeles / Long Beach, the world's biggest container port, took two times longer to turn around ships than they did before the pandemic, said RBC Capital Markets.

RBC analyst Michael Tran predicts freight prices won't return to pre-pandemic levels for several years.

Los Angeles / Long Beach will not clear their backlog before 2023, even if 3500 extra containers are unloaded each week, said McNeill.

In retrospect, the softening of prices we saw at the end of September was a false dawn. As seen from a big-data perspective, nothing is getting better materially. (Graphic: Shipping rates,

In a recent UN report, high freight rates were said to be threatening global recovery, positing that they could raise global import prices by 11% and consumer prices by 15% between now and 2023.

Additionally, a 10% rise in container freight rates cuts the output of U.S. and European industries by more than 1%.

NOT WORTH IT

In the report, it was noted that cheaper goods would rise in price at a faster rate than more expensive ones, and that poor nations producing low-value-added goods such as furniture and textiles would suffer the most competitive harm.

Retail prices of low-end refrigerators will climb 24%, compared with 65% for a more expensive brand, said Ben May, head of macro research at Oxford Economics, adding that many companies may stop shipping very cheap refrigerators because they will not be profitable.

After economic reopening, people were expected to spend more on travel and dining out than on clothing and appliances, reducing the shipping boom.

Yet, this theory is being challenged by the emergence of new COVID variants, and by customers' huge pandemic-time savings.

During the past earnings season, toymaker Hasbro, retailer Dollar Tree, and consumer products giant Nestle complained about rising freight costs and price increases.

Visit In addition to restocking with the inventory-to-sales ratio near record lows in the U.S., businesses will have to buy additional inventory.

Unicredit analysts believe this trend will support goods demand in the first half of next year. (Graphic: Inventories,
James Gellert, CEO of analytics company RapidRatings, said smaller companies may find it difficult to meet their commercial obligations and stay afloat.

The time bombs are dotted through the supply chains of large enterprises and will cause major problems for their customers who rely on their goods and services.

The only real relief may come when more vessels appear.

Ship orders have risen significantly this year. But it takes three years to build and deliver one, and it won't happen until 2024 that much new tonnage is taken to the water, ING's Rico Luman forecast. New ship orders are soaring this year, according to this graph.