The United Nations Conference on Trade and Development has explained that because of the long routes from China to countries in South America and West Africa, more ships are required for weekly service, which often leaves many stuck on the routes.
The trade body also said that South American and West African trade routes were the two developing regions greatly hit by surge in freight rate.
In a report recently, UNCTAD said, “By early 2021, for example, freight rates from China to South America jumped 443 per cent against 63 per cent on the route between Asia and North America’s eastern coast.”
The UNCTAD policy brief also revealed that the freight rates in the two regions early this year were higher compared to other major trade regions.
The UN body identified the lack of cargo return as another factor, as South American and West African nations import more manufactured goods than they export, adding that it’s costly for carriers to return empty boxes to China on long routes.
“When empty containers are scarce, an importer in Brazil or Nigeria must pay not only for the transport of the full import container but also for the inventory holding cost of the empty container,” the policy brief revealed.
According to UNCTAD, the underlying causes are complex and include change in trade patterns and imbalances, capacity management by carriers at the beginning of the crisis and Coronavirus Disease-related delays in transport connection points, such as ports.
The UNCTAD policy brief, however, highlighted three issues that the Nigerian maritime industry and policy makers needed to pay attention to, for reduction in the likelihood of recurrence.
“Policy-makers need to implement reforms to make trade easier and less costly, many of which are enshrined in the World Trade Organisation’s Trade Facilitation Agreement. By reducing physical contact between workers in the shipping industry, such reforms, which rely on modernising trade procedures, would also make supply chains more resilient and protect employees better.
“There is also need for policy-makers to promote transparency and encourage collaboration along the maritime supply chain, to improve how port calls and liner schedules are monitored. Governments must ensure competition authorities have the resources and expertise needed to investigate potentially-abusive practices in the shipping industry,” the trade body added.
