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Economies to brace themselves for the next inflation wave

Shipping’s soaring rates might be the prelude

Current skyrocketing shipping rates troubled all stakeholders – the risks of losses outweighed the possibilities of profiting. Major shipping lines warned of delays due to port congestions. Some retailers had to roll with the pressure of possible aborted voyages. Adding these up results in a catastrophic mix of economic troubles.

Halted supply chain movements
The ports in both Europe and United States can barely keep up with the bottleneck, aggravated by the COVID-19 induced border restrictions. With China adding to the collection, the speed of voyages will only slow down further. If it reaches unsustainable, cargo owners would have to bite the bullets if shipowners decide to abort certain voyages and deploy alternatives that translate to more costs.

One of the main courses of soaring rates is certainly the shortage of transportation resources to ferry the cargoes and internal competition. While the ships’ and charterers’ market implode, the byproduct is the prelude to lethal inflation that will spread across the world. Shortages will propel price hikes and the ripples flow their way into the consumers – resulting in more incentives to save than spend.

At the recent St. Petersburg International Economic Forum (SPIEF), Andrei Belousov, First Deputy Prime Minister of Russia, warned of global inflation. “The inflation wave has affected the world’s economy quite unexpectedly. We know inflation in the US is unprecedentedly high, over 4 per cent. An inflation wave starts in Europe; we see more than 2 per cent where inflation was zero before.

“Most probably, all of them are signs of not merely monetary policy weakening much spoken about now but also of structural changes occurring in consequence of dramatic weakening of contacts between people, reduction of the cross-border flow of goods, capital, workforce and the like,” he emphasised.

Assuming the worst, meager inflation will manifest when the shortage results in shifts of purchasing patterns. The demand for certain goods will be substantially reduced – slowing economic growth and depress wages. Cargo owners and charterers should act fast to get around bottlenecks by avoiding them; to hopefully mitigate another global meltdown. If that means finding alternatives, Marine Online has an extensive network of vessels across a wide array of routes for urgent charters.

 

Marine Online Media Team
Please email us at marketing@marineonline.com to contact the author for this article.

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