Relief from global shipping woes to come in ‘23–ADB

RELIEF from the global shipping woes may only come in 2023 as ships ordered by logistics firms start being delivered, according to economists from the Asian Development Bank (ADB).

In an Asian Development Blog, ADB Economic Research and Regional Cooperation Department (ERCD) trade economist Jules Hugot and Economic Researcher and Data Analyst Reizle Platitas said orders for additional ships were made in 2021 and these are expected to be delivered next year.

The delivery of new ships is seen among the means for easing global shipping woes, especially if global demand for goods remains strong. But should demand decline, shipping bottlenecks could be unclogged.

“Shipping bottlenecks could be relieved by a decline in global demand for goods. This will happen when consumers rebalance their spending toward services, as economies continue to recover from the pandemic,” Hugot and Platitas said. “But demand for goods may decline only gradually and it could remain higher than pre-pandemic levels.”

The economists recommended that governments intensify their efforts to remove trade barriers and increase investments in digital infrastructure to alleviate shipping bottlenecks.

“Global supply chains have been vital to ensuring the resilience of the global economy during the pandemic. Minimizing supply chain disruptions in difficult times is thus critical to withstand shocks,” the authors said.

Asian advantage

However, Hugot and Platitas said Asian countries, including the Philippines, are less affected by shipping bottlenecks because of relatively shorter delivery times compared to the US or Europe.

The authors noted that deliveries have improved in Asia and were even faster than the global average globally between 2016 and 2021. This was especially the case in the People’s Republic of China, Indonesia, India and Thailand.

In the Republic of Korea, the Philippines, Viet Nam and Malaysia, delivery times are longer compared to those in the region but remain faster than the euro area, the United States and other advanced economies.

One of the reasons for this is the slower recovery in Asia’s developing countries like the Philippines. This prevented a significant increase in incomes and more muted consumption.

The authors said direct cash transfers in households of developing Asian countries were considerably smaller than the transfers provided in countries like the US.

The high transfers in the US buoyed consumption, leading to a significant increase in the demand for goods, especially compared to their demand for services.

“Demand in Asia did not shift from services to goods as much as it did in the United States. Services activity in the region continued to be hindered by Covid-19 mobility restrictions in 2021. Reduced spending on services, however, did not boost purchases of goods as much as it did in the US and in some other advanced economies,” they explained.

Costs spiked

However, Asia remained affected by the shipping bottlenecks. Hugot and Platitas said intra-Asia shipping costs increased and reached 4.7 times that of prepandemic levels by the end of February.

“This increase reflects port disruptions caused by outbreaks of the Omicron variant and the reduced availability of containers and ships, as resources were reallocated to more lucrative routes,” the economists said.

Last year, BusinessMirror reported that shipping costs for exports have increased “10-fold” with outbound shipments being delayed by one month to three months at worst.

Industry sources said the cost of shipping one dry container from Manila to the European Union has ballooned to $5,000 from the usual $800 (about P38,424.40 at current exchange rates).

Shipping one 20-foot container from Manila to the US West Coast used to cost only about a maximum of $1,000 (P48,030.50); it’s now hitting $5,000 (P240,152.50). [Read the BusinessMirror story here:]

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