• Monday, May 27, 2024
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China to Lagos container shipping cost grows 203.22% in 2021 – UNCTAD

Improving shipbuilding capabilities in Africa

The cost of shipping a container from Shanghai Port in China to Lagos Port reached a record high of $8,102 per twenty equivalent units (TEU) of container in July 2021 from $2,672 per TEU in the same period in 2020, according to the United Nations Conference on Trade and Development (UNCTAD).

This represents about 203.22 percent increase in freight rate, which according to UNCTAD also affected other trade routes and was due to the disruption in the global supply chain caused by the outbreak of the Covid-19 pandemic.

The disruption, UNCTAD said, also resulted in global container shortages, port congestion, and delays at ports.

UNCTAD in its latest report titled the ‘Review of Maritime Transport 2021,’ said the fluctuations in freight rates experienced in 2021, reflect changes in lockdown policies and varying speeds of recovery, as well as the impact of shortages of both containers and ships as well as congestion in key ports.

“These surges are likely to be amplified in most of the low- and middle-income countries of the Arab region, especially those suffering from conflicts or economic or financial crises which have had major impacts on patterns of production and consumption – and on maritime freight rates,” UNCTAD stated in the report.

Consequently, UNCTAD predicted that a surge in container freight rates will add to production costs which can feed through to consumer prices.

“This can slow national economies, particularly the structurally weak ones such as small island developing states (SIDS), least developed country (LDCs), and landlocked developing countries (LLDCs) – whose consumption and production patterns are highly trade-dependent,” the report predicted.

UNCTAD further said that freight rates also escalated on the China-United States trade lane, and, which also faced backlogs and longer waiting times such that shipping lines added extra fees and surcharges.

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It said that in June 2020, the Shanghai Containerized Freight Index (SCFI) spot rate on the Shanghai-Europe route was less than $1,000 per TEU but by the end of 2020, it reached around $4,000 per TEU and remained firm throughout the first quarter of 2021.

“By the end of April 2021, despite a 3 percent increase in supply capacity, the SCFI spot freight rate on the Shanghai-Europe route surged to $4,630 per TEU, and by the end of July 2021 has reached $7,395 percent TEU.

“In the last quarter of 2020, the Shanghai-West Coast North America route capacity expanded by 5 percent and in the first quarter of 2021 by a further 7 percent. However, the SCFI spot rate reached around $4,500 per forty-foot equivalent unit (FEU) in April 2021, compared to $1,600 per FEU in April 2020, and climbed further to $5,200 per FEU in July 2021,” UNCTAD stated.

UNCTAD said the trend was similar on routes from Asia to the East Coast such that in the first six months of 2021, SCFI spot rates on the Shanghai-East Coast North America route more than doubled, and by the end of July 2021 had reached $10,067 per FEU.

UNCTAD said there was also a surge in rates from China to the Arab region. On China, to South America (Santos) route the rate was $959 per TEU in July 2020 but by the end of July 2021, it reached $9,720 per TEU.

Between October 2020 and June 2021 the SCFI from Shanghai to Dubai rose by 176 percent and from Shanghai to the Mediterranean ports by 400 percent. The surge in spot freight rates also extended across developing regions, including South America and Africa.

The surge in rates, UNCTAD said, does not take into account the premiums cargo owners were often charged to get any certainty that their boxes would be moved promptly.

To alleviate the impact on consumer prices, UNCTAD said that some countries adopted special measures. In Lebanon, for example, when calculating the Customs fees on imported goods, the Customs authorities used the official exchange rate, which is far below the black-market exchange rate.

In Jordan, when calculating Customs fees on imported goods, Customs authorities had to put a ceiling on freight rates.

“According to the International Chamber of Navigation in Beirut, both measures did slightly alleviate the impact on consumers. But these subsidies may be difficult to sustain, so it will be important to consider the economic and financial evidence, to see how they compare with more conventional trade facilitation procedures,” UNCTAD added in the report.