Since the Corona pandemic crisis, the war in Ukraine, supply chains and freight forwarding have been at the fore in answering the question about the reasons for the price jump; It controls the transportation and supply of much of what we consume, from food to clothes to cars and more, through a supply chain that stretches across the globe.
Every day, millions of seafarers, truck drivers, stevedores and warehouse workers make sure that mountains of goods move to stores and homes, but the movement that underpins the global economy is more vulnerable than thought.
And the question that specialists are now looking into: How will the war in Ukraine and the latest wave of Corona in China change supply chains and prices?
A new global supply chain system
Expectations are moving towards the emergence of a new global system for the supply chains of the goods that we depend on on a daily basis, to be closer to regional alliances, after the risks of relying on global chains were exposed, as was evident in the chips crisis during the dispute between America and China, and then the food crisis following the Russian-Ukrainian war. , which affected the prices of wheat and grains globally.
“The disruption to the supply chain should prompt a reconsideration of how and where goods and services are obtained,” says Omnia Helmy, professor of international economics at Cairo University. “We can do nothing as consumers, but governments can do a better job of ensuring supply and providing insulation from supply shocks that do not escape in a turbulent world.”
Helmy added in an interview with “Sky News Arabia” that governments are following the repercussions of the Ukrainian crisis on prices and supply chains, which coincide with the rapid rise in interest rates globally, and are planning to deal flexible with these challenges according to the most difficult scenario that is assumed throughout the duration of the conflict.
She cited, for example, that the cost of shipping freight (shipping freight charges) by sea has doubled 7 times last year; This is reflected in the prices of the inputs, and therefore the prices of the final products.
According to Bloomberg data, the immediate shipping price of a 40-foot container from Asia to the United States exceeded $20,000 in 2021, a 10-fold increase from a cost of $2,000 a few years ago, and this figure was recently near $14,000.
spoils and spoils
Umniah Helmy expected that prices would continue to rise this year, especially with the return of the intensity of corona infections in China, in contrast to the uncertainty of the future of the Ukrainian crisis.
“Global freight companies will continue to increase rates to reap thriving profits, while smaller businesses and their customers have to pay more for almost everything,” she says.
The professor of international economics pointed out that while large consumers of seaborne goods have the weight to negotiate better terms in deals and absorb the additional expenses, small importers and exporters – especially in poor countries – who rely on these companies to transport everything from electronics and clothing to grain and materials cannot Chemical, these costs pass easily, which means a new wave of inflation in those countries.
Impact on capital
According to a study by the Chamber of Food Industries of the Federation of Egyptian Industries, small and medium-sized companies in the sector were severely affected after the increase in container prices last year, pointing to the erosion of 50 percent of the capital of exporting companies when European buyers refrained from bearing the high costs.
Umniah Helmy comments: “It is not only the survival of business that is at stake.. If nothing is done to curb freight rates with the concerns of the Ukrainian crisis, the risks of inflation and food security could increase very dramatically.”
According to a study by the US Federal Reserve Bank of Kansas, increased shipping costs are an intractable problem rather than a passing one.
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