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Philippines: Shipping woes, high rates to last until Q3
MANILA, Philippines — The global bottlenecks for shipping resulting in higher freight rates are expected to remain elevated until the third quarter of the year, weighing down on trading economies including the Philippines.
In its weekly economic preview, market intelligence firm IHS Markit said the continued strong recovery in the global economy is followed by uptick in prices of raw materials and worldwide shipping woes.
“With peak shipping season looming for Christmas retail orders from the US and Europe, shipping bottlenecks and freight rates in Asia are likely to stay at elevated levels during the third quarter,” IHS Markit Asia-Pacific chief economist Rajiv Biswas said.
Philippine exporters are already lamenting the disruptions in the global shipping industry, which resulted in higher costs for both imports and exports.
Shipping costs have been on the rise as exports in the Asian region are catching up, resulting in container shortages and soaring freight rates.
Average Asia-US East Coast container freight rates on short-term contracts are already up 56 percent from year-ago levels.
Biswas explained that global shipping problems were exacerbated by congestion in Chinese ports and shipping delays due to stringent health measures following a COVID-19 cluster outbreak in some areas.
Indian ports are also facing disruption following the second wave of COVID-19 in the country, leading to port closures and shipment delays.
London-based Capital Economics echoed the same, saying global sea freight rates for container shipping are now 4.5 times their level from the start of 2020, with even bigger increases for shipping routes from Asia to Europe.
“The latest rise in costs coincided with congestion at global ports and anchorages returning to their 2020 peak with Chinese ports, in particular, seemingly struggling to keep up with demand,” senior global economist Simon MacAdam said.
Further, IHS Markit said commodity prices have risen sharply over the past year as global demand has gradually recovered from widespread lockdowns across the world.
Latest data showed that cost pressures were stronger in manufacturing segments with all 18 industry sectors registering higher input prices.
“In the electronics industry, the strength of global electronics demand is continuing to exacerbate semiconductors shortages for some manufacturing industries, notably the global automotive sector,” Biswas said.
Although there has been a significant upturn in input prices for many manufacturing industry sectors, Biswas maintained this is not yet expected to lead to a broader uptick in consumer inflation pressures in many economies in the Asia Pacific.
However, he said a gradual normalization in conditions in many commodity markets is expected as supply chain disruptions gradually ease, resulting in softening for many commodities.
“But, in the interim, goods price inflation further downstream in supply chains will remain strong through the third quarter and possibly through the end of 2021,” Biswas said.
Source: https://www.philstar.com/business/2021/06/28/2108483/shipping-woes-high-rates-last-until-q3