WTO signals end to shipping crisis
THE World Trade Organisation (WTO) has given the signal that the global logistics environment could be back to normal sooner than expected.
Earlier this month WTO economists upgraded the forecast for trade growth. World merchandise trade volume is now set to grow by 10.8 per cent this year and 4.7 per cent next year.
Chief economist at the WTO Robert Koopman said, “The ocean freight shipping companies have increased their orders for the standardised containers, and that supply is going to be coming probably in the next few months. My guess is you’re going to see the ocean and air freight environment start to stabilise here in the next few months, and I wouldn’t be surprised if in the longer term we see a return to something that look much more normal.”
Earlier this year shipping prices skyrocketed as the demand for containers outweighed supply. The logistical crisis resulted in consumer price increases as merchants passed on the costs. But with an adjustment to the supply side, consumers could get some reprieve in the coming months.
Although things are starting to improve, senior economist at the WTO Coleman Nee said he’s already noticing that some of the disruption caused by the pandemic could remain for a long time.
“Trade and services have been hard hit by the pandemic and have not really fully come back. It shows the beginnings of recovery, but at a lower level, so there seems to be some long-lasting damage to the services trade. Services trade will probably remain below its potential as long as there are significant restrictions on the movement of people across borders as a result of the pandemic.”
At the same time, director general of the WTO Dr Ngozi Okonjo-iweala said: “The trade recovery is strong, but unequal, mirroring the ‘K’ shaped outlook in global economic output. Some regions, those with access to vaccines and sufficient fiscal space, are recovering strongly, while poorer regions — with mostly unvaccinated populations — are lagging behind. Moreover the risks to the outlook are firmly on the downside. The pandemic itself is far from over and new outbreaks and variance of COVID-19 could weigh on trade and output through 2022.”
She further noted that both sea freight container throughput and air cargo are at or near all-time highs, reinforcing the notion that supply chain stress is being driven largely by the demand side.
“We also see very high ocean freight rates driving more cargo to the airfreight channel. Rising transport costs and delivery delays are creating major challenges for small and medium-sized businesses...competing with large firms with much greater volume demands,” she continued.