The skyrocketing price of shipping goods across the globe may hit your pocketbook sooner than you think – from that cup of coffee you get each morning to the toys you were thinking of buying your kids.
Transporting a 40-foot steel container of cargo by sea from Shanghai to Rotterdam now costs a record $10,522, a whopping 547 per cent higher than the seasonal average over the last five years, according to Drewry Shipping.
With upwards of 80 per cent of all goods trade transported by sea, freight cost surges are threatening to boost the price of everything from toys, furniture and car parts to coffee, sugar and anchovies, compounding concerns in global markets already bracing for accelerating inflation.
“In 40 years in toy retailing I have never known such challenging conditions from the point of view of pricing,” Gary Grant, founder and executive chairman of the UK toy shop The Entertainer, said. He stopped importing giant teddy bears from China because their retail price would have to be doubled to add in higher freight costs. “Will this have an impact on retail prices? My answer has to be yes.”
A confluence of factors – soaring demand, a shortage of containers, saturated ports and too few ships and dock workers – have contributed to the squeeze on transportation capacity on every freight path. Recent Covid outbreaks in Asian export hubs like China have made matters worse. The pain is most acutely felt on longer-distance routes, making shipping from Shanghai to Rotterdam 67 per cent more expensive than to the US West Coast, for instance.
Often dismissed as having an insignificant impact on inflation because they were a tiny part of the overall expense, rising shipping costs are now forcing some economists to pay them a bit more attention. Although still seen as a relatively minor input, HSBC estimates that a 205 per cent increase in container shipping costs over the past year could raise euro-area producer prices by as much as 2 per cent.
At the retail level, vendors are faced with three choices: halt trade, raise prices or absorb the cost to pass it on later, all of which would effectively mean more expensive goods, said Jordi Espin, strategic relations manager at the European Shippers’ Council, a Brussels-based trade group that represents about 100,000 retailers, wholesalers and manufacturers.
“These costs are already being passed to consumers,” he said.
Prices for customers are rising in other ways, too. For instance, anchovies from Peru have largely stopped being imported into Europe because with the higher freight costs they are not competitive relative to what’s available locally, Mr Espin said. Also, European olive growers can no longer afford to export to the US, he said.
Meanwhile, shipping bottlenecks and costs are hurting the transport of arabica coffee beans, favoured by Starbucks, and robusta beans used to make instant coffee, which are largely sourced from Asia.
Few industry observers expect container rates to retreat much any time soon. Lars Jensen, chief executive of consultant Vespucci Maritime in Copenhagen, on a Flexport webinar last week said that there’s “zero slack in the system”.
Closely held French shipping company CMA CGM, which raked in net income of $2.1 billion in the first quarter compared with $48 million in the year-ago period, indicated recently that it expects “sustained demand for the transportation of consumer goods” to continue throughout the year.
Freight costs are more painful for companies that move clunky, low-value items like toys and furniture.
“If they are bulky products it means you can’t get very many in the container and that will have a significant impact on the landed price of the goods,” The Entertainer’s Mr Grant said.
For some lower-value furniture makers, freight now makes up about 62 per cent of the retail value, according to Alan Murphy, chief executive of consultant Sea-Intelligence in Copenhagen.
“You simply can’t survive on this,” he said. “Someone is bleeding very hard.”
Companies are desperately trying to work around the higher costs. Some have stopped exporting to certain locations while others are looking for goods or raw materials from nearer locations, according to Philip Damas, founder and operational head of Drewry Supply Chain Advisors.
In 40 years in toy retailing I have never known such challenging conditions from the point of view of pricing
“The longer these extreme shipping freight rates last, the more companies will take structural measures to shorten their supply chains,” Mr Damas said. “Few companies can absorb a 15 per cent increase in total delivered costs for internationally traded products.”
Some firms in Europe are resorting to extreme methods, like using truck convoys to get products including automotive parts, bikes and scooters from China, said Mr Espin.
Central bankers have so far been sanguine about the phenomenon, arguing that the rise in consumer prices tied to supply hiccups would not last. European Central Bank President Christine Lagarde on June 10 said that while supply chain bottlenecks would push up production prices and the headline inflation rate is expected to rise further in the second half of this year, the effect will fade.
Several factors explain the relative lack of concern. Shipping costs only constitute a small fraction of the final price of a manufactured good, with economists at Goldman Sachs estimating in March – when China-Europe rates were about half of current levels – that internationally they made up less than 1 per cent.
To top that, companies have annual contracts with the container lines, so the prices they have locked in are considerably lower than the headline-grabbing spot rates. Although the latest round of contract negotiations in May reflected the stronger spot market, HSBC trade economist Shanella Rajanayagam said that “the longer-term rates are much much lower than the spot rates, even if they are feeding through”.
With the end of lockdowns consumer demand is likely to shift to services from goods, but “the risk of course is that higher shipping costs persist – especially given ongoing shipping disruption – and that producers become more willing to pass these higher costs on to consumers”, Ms Rajanayagam said.
While many economists note that even a full pass-through of higher shipping fares to consumers will have a marginal effect on headline inflation, Volker Wieland, a professor of economics at the Goethe University in Frankfurt and a member of the German government’s council of economic advisers, warns that they might not be sufficiently factored in.
“Even if the order of magnitude is smaller than estimated, the dynamic builds over a year and has significant effects,” he said. “That means there’s a danger we’re underestimating the impact.”
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
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UAE currency: the story behind the money in your pockets
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50 staff members required to prepare an iftar
200 to 350 the number of people served iftar nightly
160 litres of the traditional Ramadan drink, jalab, is served in total
500 litres of soup is served during the holy month
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350 kilograms of onion is used in dishes
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Dubai Bling season three
Cast: Loujain Adada, Zeina Khoury, Farhana Bodi, Ebraheem Al Samadi, Mona Kattan, and couples Safa & Fahad Siddiqui and DJ Bliss & Danya Mohammed
Rating: 1/5
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
MATCH INFO
Uefa Champions League, last-16. first leg
Atletico Madrid v Juventus, midnight (Thursday), BeIN Sports
THE SPECS
Engine: 1.5-litre turbocharged four-cylinder
Transmission: Constant Variable (CVT)
Power: 141bhp
Torque: 250Nm
Price: Dh64,500
On sale: Now
Top New Zealand cop on policing the virtual world
New Zealand police began closer scrutiny of social media and online communities after the attacks on two mosques in March, the country's top officer said.
The killing of 51 people in Christchurch and wounding of more than 40 others shocked the world. Brenton Tarrant, a suspected white supremacist, was accused of the killings. His trial is ongoing and he denies the charges.
Mike Bush, commissioner of New Zealand Police, said officers looked closely at how they monitored social media in the wake of the tragedy to see if lessons could be learned.
“We decided that it was fit for purpose but we need to deepen it in terms of community relationships, extending them not only with the traditional community but the virtual one as well," he told The National.
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How has net migration to UK changed?
The figure was broadly flat immediately before the Covid-19 pandemic, standing at 216,000 in the year to June 2018 and 224,000 in the year to June 2019.
It then dropped to an estimated 111,000 in the year to June 2020 when restrictions introduced during the pandemic limited travel and movement.
The total rose to 254,000 in the year to June 2021, followed by steep jumps to 634,000 in the year to June 2022 and 906,000 in the year to June 2023.
The latest available figure of 728,000 for the 12 months to June 2024 suggests levels are starting to decrease.
GAC GS8 Specs
Engine: 2.0-litre 4cyl turbo
Power: 248hp at 5,200rpm
Torque: 400Nm at 1,750-4,000rpm
Transmission: 8-speed auto
Fuel consumption: 9.1L/100km
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Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
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Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
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Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
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UAE currency: the story behind the money in your pockets
Tori Amos
Native Invader
Decca
Company profile
Date started: 2015
Founder: John Tsioris and Ioanna Angelidaki
Based: Dubai
Sector: Online grocery delivery
Staff: 200
Funding: Undisclosed, but investors include the Jabbar Internet Group and Venture Friends
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More than 2.2 million Indian tourists arrived in UAE in 2023
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5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
MATCH INFO
Cricket World Cup League Two
Oman, UAE, Namibia
Al Amerat, Muscat
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Oman beat UAE by five wickets
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Namibia beat Oman by 52 runs
UAE beat Namibia by eight wickets
UAE v Oman - abandoned
Oman v Namibia - abandoned
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Hydrogen has an estimated $11 trillion market potential, according to Bank of America Securities and is expected to generate $2.5tn in direct revenues and $11tn of indirect infrastructure by 2050 as its production increases six-fold.
"We believe we are reaching the point of harnessing the element that comprises 90 per cent of the universe, effectively and economically,” the bank said in a recent report.
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The cost of electrolysers used in green hydrogen production has halved over the last five years and will fall to 60 to 90 per cent by the end of the decade, acceding to Haim Israel, equity strategist at Merrill Lynch. A global focus on decarbonisation and sustainability is also a big driver in its development.
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
Killing of Qassem Suleimani
The biog
Full name: Aisha Abdulqader Saeed
Age: 34
Emirate: Dubai
Favourite quote: "No one has ever become poor by giving"
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Who has been sanctioned?
Daniella Weiss and Nachala
Described as 'the grandmother of the settler movement', she has encouraged the expansion of settlements for decades. The 79 year old leads radical settler movement Nachala, whose aim is for Israel to annex Gaza and the occupied West Bank, where it helps settlers built outposts.
Harel Libi & Libi Construction and Infrastructure
Libi has been involved in threatening and perpetuating acts of aggression and violence against Palestinians. His firm has provided logistical and financial support for the establishment of illegal outposts.
Zohar Sabah
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Coco’s Farm and Neria’s Farm
These are illegal outposts in the West Bank, which are at the vanguard of the settler movement. According to the UK, they are associated with people who have been involved in enabling, inciting, promoting or providing support for activities that amount to “serious abuse”.
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
