Global shipping tensions peaked at the end of the holidays, when prices have risen the highest since 2010. At the same time, they continue to rise, literally from hour to hour.
“Interest in goods from Asia is currently extreme, but there is little free capacity. There has been a large increase in the price of maritime transport, in some cases up to ten times, “says Pavla Hobíková, spokeswoman for the Mall.cz online portal.
The same sounds from other business addresses. “In 2021, we saw a nine-fold increase in shipping prices. In previous years, the unit’s container cost a thousand dollars, now we pay over twenty thousand dollars for the container, “says the head of the textile company Alpine Pro, Václav Hrbek.
A tense situation also prevails among Swedish furniture legends. “The increase in the cost of transporting goods is, of course, a factor that has a relatively significant impact on our business,” says IKEA CFO Jan Váchal.
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At the same time, the sea route was historically the cheapest option for transporting goods across continents. “Compared to before the pandemic, we are now at four hundred percent of the original prices,” said Martin Hrbek, Gefco’s Air & Sea Sales Director. The situation has no historical analogues.
“We have never experienced such a situation. Although the pressure on prices will weaken together with the cooling of demand, transport costs will probably remain permanently higher, “says the head of the engineering company Atas elektromotory and vice-president of the Association of Exporters Otto Daněk.
“In maritime transport, we have found ourselves in a situation where prices are literally flying up and the price offers we receive from shipowners are valid not in days, but in hours,” adds Hrbek from Gefka.
Rising transport prices are threatening to have a significant impact on inflation. “Although we have concluded global contracts for the transport of goods, which eliminate sudden fluctuations, the trend of rising transport prices obviously affects our input costs, and thus puts pressure on our pricing,” adds Váchal.
The main wave of price increases due to transport costs may come later. “For the Alpine Pro autumn collection, we plan to increase prices in the order of percentage units only for some selected items. We will take more into account the increased logistics costs in the spring collection for 2022, ”says the head of the textile factory, Hrbek.
The key to the intensity of price increases is the size of the goods in combination with the degree of its “redundancy”. “The biggest impact on the price is noticeable especially for high-volume products, such as in our case gaming chairs, tables or simulators,” emphasizes the sales director of the online retailer CZC.cz Tomáš Pilský.
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Exacerbated transport costs in the global economy are confirmed by the development of the Baltic Dry index, which reflects the average development of freight transport costs in the world economy. In addition, over the years, the index has gained in importance as an indicator of the state and outlook of the global economy.
During this year alone, Baltic Dry has almost tripled, the last time it was stronger in the spring of 2010. During August alone, transport costs rose by almost a third. Another index of CTS transport costs shows a similar direction, which in July recorded a year-on-year increase in prices of “only” about twice.
“The increase in the cost of maritime transport is mainly due to imbalances between supply and demand in different parts of the world due to the timing of lockdowns,” says Jiří Pour, an economist at UniCredit Bank. According to him, the development will be reflected in the prices of industrial goods not only on both sides of the Atlantic. “In the longer term, it will be reflected in the already tense consumer prices. In the case of the Czech Republic, the growth of the Baltic Dry index would indicate an acceleration of inflation growth by about seven tenths of a percentage point, “he adds.
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According to economists, the immediate increase in transport costs is linked to the situation in Chinese ports. The third largest container port near Ningpo, two hundred kilometers south of Shanghai, has completed a substantial two-week closure. The Chinese authorities approached it after a single case of a person who tested positive for the coronavirus delta mutation.
“Due to complications in Chinese ports, delays are chained at first, but then traffic is even denser,” emphasizes Jan Hadrava, an economist at the consulting company PwC.
The Baltic Dry Index, and thus also the transport costs in the world economy from a pandemic low in May last year, has grown from less than 400 at the time to the current 4,100 points, ie more than ten times. The index reached almost 12,000 points in May 2008 during the peak of the global financial crisis.
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