High freight rates are exerting pressure on global supply chains, significantly affecting vulnerable economies, according to a statement from the UN Conference on Trade and Development (UNCTAD). In 2024, global freight rates have surged primarily due to disruptions in major maritime routes such as the Red Sea, Suez Canal, and Panama Canal. These disruptions have resulted in rerouted vessels, increased fuel consumption, port congestion, and higher operating costs for industries and consumers worldwide.
UNCTAD highlighted that the most severe impacts are being experienced by vulnerable small island developing states (SIDS) and least developed countries (LDCs). The rising freight rates raise concerns about trade sustainability, economic growth, and progress toward global sustainable development goals. As of mid-October, the Shanghai Containerized Freight Index (SCFI) remains significantly higher than pre-pandemic levels, despite a recent decline. The SCFI is down 45% from its 2024 peak and 60% below its record level during the pandemic. However, it is still 115% above the pre-pandemic average and more than double the average from 2023.
Spot freight rates on routes outside the primary trans-Pacific and Europe-bound corridors have also seen substantial increases. Between January and July 2024, the average rate on the SCFI for the Shanghai–South America route more than doubled, reaching $9,026 per twenty-foot equivalent unit (TEU), the highest since September 2022. Similarly, the SCFI for the Shanghai–South Africa route nearly tripled to $5,426 per TEU, its highest level since July 2022. The SCFI for the Shanghai–West Africa route experienced a 137% increase, reaching $5,563 per TEU, marking its highest since August 2022.
UNCTAD’s estimates suggest that climate-related low water levels in the Panama Canal contributed significantly to the recent increases in shipping costs. The report indicates that these elevated costs could result in a 0.6% rise in global consumer prices by 2025, with economies reliant on imports, particularly SIDS, facing even greater risks of price increases, projected at 0.9%. Processed food costs alone may rise by 1.3%, posing challenges for food security in these regions.
The latest Review of Maritime Transport 2024 by UNCTAD also underscores how rising costs and declining connectivity, which has decreased by 9% over the past decade for SIDS and LDCs, are undermining trade competitiveness and hindering economic growth in vulnerable economies reliant on shipping for essential goods.
UNCTAD is calling for immediate action to mitigate freight market volatility and support vulnerable economies through monitoring freight market trends to detect cost spikes early and coordinate efforts to minimize disruptions, strengthening international cooperation to reduce chokepoint disruptions and promote regional trade, and investing in port and infrastructure improvements to alleviate congestion and enhance supply chain efficiency, particularly at transshipment hubs.
The rise in freight rates reflects underlying structural weaknesses in global supply chains, including vulnerabilities to geopolitical conflicts and climate change. UNCTAD emphasized the need for urgent action to address these issues, stating that “without measures to reduce freight market volatility and tackle the root causes of disruptions, the economic and social impacts on vulnerable economies could be long-lasting.” The organization advocates for investments in resilient infrastructure, diversification of trade routes, and support for sustainable shipping and port solutions to foster more efficient, equitable, and resilient trade.
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