And this time in a radical manner. Shifex, one of the most representative indexes in container traffic, since it includes the rates between Shanghai (China) and Los Angeles (USA), already registers fall of more than 60% compared to maximums. These are the lowest levels for two years, and already, in fact, it is $1,500 below its historical average, having price dropped to $7,275.
Other indices, such as the Shanghai Containerized Freight Index (SCFI), show a similar trend. This index, which is the most representative, is based on the most used trade routes from Shanghai to the US, the Persian Gulf or Southeast Asia, in addition to the European ports of Rotterdam, Hamburg, Antwerp, Felix Stowe (east of England) and Le Havre. In this case, the decreases are greater than 50%.
In both cases, the reason is the same: the weakness of world trade, and more particularly maritime transport between China and the rest of the world. Some analysts quoted by specialized publications estimate that if the current trend continues, prices will soon return to pre-pandemic levels. In other words, one of the bottlenecks that have contributed to raising inflation intensely since the world economy began to shake off the coronavirus would end up widening. This also means that with fewer congestion issues at ports in China and the US, carriers can reduce transit times on their routes, which also contributes to lower prices. Behind the tensions in prices are, precisely, the extraordinary profits that shipping companies have obtained. A report prepared by the Danish maritime analysis company Sea-Intelligence has estimated that in the second quarter of this year the main companies in the sector have obtained 41.6 billion dollars (a similar figure in euros) in profits, which represents the longest period profitable in the last decade. The reduction in freight rates joins other very significant cuts that have occurred in other sectors and economic activities. Energy raw materials, but also cereals, which in the recent past have contributed very significantly to the increase in prices.
The shipping reconversion and a new tax put more pressure on inflation
Wheat, for example, according to the report published this Thursday by the FAO (the United Nations agency for food and agriculture), accumulates three consecutive months of falls until August, due to the reopening, albeit partial, of the Ukrainian grain, which is added to the greater availabilities in Argentina. Only in August there were reductions of 4% and 7% in Australia and the US, respectively. The price of corn, on the other hand, rose slightly. The price of rice, fundamental in some areas of the planet, is stabilized, although it never rose like the rest of food products. To these decreases we must add the behavior of oil, which has been around ninety dollars, far from the three digits in which it was quoted a few weeks ago. Gas, for its part, is still at astronomical levels, around 212 euros megawatt/hour, but far from the 346 euros that it was quoted at the end of August.
Some market operators quoted by the ‘Financial Times’ maintain that gas prices may have reached a turning point and that they could begin to stabilize in the coming weeks, as they did this spring after an initial increase after the large-scale invasion. scale of Ukraine by Russia. This is so because, since Russia has already cut gas supplies to Europe by close to 80%, its ability to generate further negative surprises is more limited. Another thing is what happens next year from spring, when Europe is once again forced to refill gas deposits for the following winter.
A final indicator clearly reflects what is happening. The Global Supply Chain Pressure Index (GSCPI), compiled by the New York Federal Reserve, reflects that tensions have eased again in August. This confirms a declining trend that began in April this year. As the New York Fed maintains, the drop in August was quite large, with declines in delivery times recorded for all countries in the sample. Now, it is nuanced, the movements suggest that, although the pressures of the global supply chain have decreased, “they remain at historically high levels.” All these movements coincide in time with the tightening of monetary policy by central banks, which have increased the pressure on trade by raising interest rates. The ECB did it recently (0.75 percentage points) and the Federal Reserve will do it soon, in a similar figure.
Although the transmission of monetary policy takes several quarters to reach the real economy, the cooling off growth expectations has a decisive influence on the decisions of economic agents. Something that explains why, as there is less demand, the fall in prices accelerates. This suggests that inflation is close to peaking, if not already, and that the components that have caused extraordinary gains are weakening. Yesterday, in fact, the World Bank, in a new report, warned that the planet may be close to a recession, since the three main regions, the US, the European Union and China, are seeing growth slow down.
EC EXCLUSIVE Source El Confidencial