Eurozone Inflation and Its Impact on Freight Rates

For the past 18 months, the skyrocketing shipping costs and disruptions on global supply chains have put pressure on shippers, manufacturers, retailers, and governments.

That crunch, coupled with surging consumer demand, rising energy prices, and a peak shipping season defined by labor and equipment shortages—along with crowded ports is pushing up prices and causing a surge of inflation across the globe.

Looming threats from increased labor and energy costs

The situation in continental Europe is not yet as bad as in the US and the UK. Still, there are some concerns that the combination of snagged supply chains and rising energy prices could cloud the European Central Bank’s outlook for a strong recovery and transitory inflation. By October, the eurozone’s inflation levels had already hit a 13-year high at 4.1%, driven primarily in part by a 23% spike in energy prices.

While inflation is most likely not expected to impact freight rates directly in the foreseeable future, increased labor and energy costs threaten to drag on the pandemic’s sky-high rates and premiums. Labor shortages at every stage of the supply chain have pushed firms to increase wages in hopes of attracting and retaining enough workers to meet demand. And soaring energy prices across the continent are sure to compound those increased labor expenses.

Inflation should ease, but vulnerabilities remain

There is consensus that the eurozone’s inflation should ease along with demand for consumer goods as stimulus programs across the continent and the rest of the world end and the need for services picks up. The outlook for energy prices remains dubious, but they too should ebb as gas and oil supplies increase, and governments tap into reserves and instill price caps and subsidies.

The likelier scenario seems to be that inflation will continue through 2022 — albeit at a slower pace than in 2021 — and eventually subside. But this is a difficult prediction to make in a landscape rife with uncertainty. Anything from a spike in COVID-19 infections like the one happening now in Germany and Austria to a colder winter than expected will be enough to throw already bruised supply chains easily off balance again.

Navigating Europe’s surging inflation

Shippers should ready themselves to continue facing the same challenges they have throughout the pandemic and the added pressures of inflation. Fixed contracts will be one of the best options for securing freight prices and planning and forecasting more efficiently.

CTSI-Global’s business intelligence tools can help firms make the right logistical decisions and streamline their supply chains. Contact us today for the tools and support you need to navigate every shipping challenge confidently.