The term “global supply chain” is no longer a mystery after everyone felt its role in the price hikes that hit every household, prompting experts to call for regional alliances to prevent global chains from controlling the prices and transportation of goods.

Since the Covid-19 crisis, the Ukrainian war, supply chains and freight forwarders have been answering questions about why prices are so high; They control the transportation and supply of most of the items we consume, from food to clothes to the car and so on.

Every day, millions of seafarers, truck drivers, stevedores and warehouse workers ensure that mountains of goods are delivered to shops and homes, but the movement underpinning the global economy is more fragile than thought.

The question experts are working on now: How will the war in Ukraine and the recent wave of Covid-19 in China change supply chains and prices?

A new global supply chain system

The emergence of a new global system of commodity supply chains on which we depend on a daily basis is approaching the expectations of regional alliances after the exposure of the risks of dependence on global chains, as happened in the potato chip crisis during the US-China conflict, and after the Russian-Ukrainian war the food crisis affected the prices of global wheat and grain.

Omnia Helmy, professor of international economics at Cairo University, said: “Disruptions in supply chains should lead to a rethinking of how and where goods and services are obtained. As consumers, there is not much we can do, but governments can do better. Ensure supply and prevent Supply shocks are inevitable in a turbulent world.”

Helmy added in an interview  that governments are monitoring the impact of the Ukrainian crisis on prices and supply chains, which coincides with the rapid rise in global interest rates, and plan to build their plans on what is supposed to be. harder during conflict.

She cites, for example, that freight costs (freight rates) have increased sevenfold in the past year; This is reflected in the price of the input, and therefore the price of the final product.

According to Bloomberg data, the rate for immediate ocean freight of a 40-foot container from Asia to the United States in 2021 is more than $20,000, a 10-fold increase from $2,000 a few years ago, which recently approached $14,000.

spoils

Omnia Helmy expects prices to continue to rise this year, especially with the return of the severity of the coronavirus infection in China, in stark contrast to the uncertainty about the future of the Ukrainian crisis.

“Global shipping companies will continue to raise freight rates to make a profit, while smaller businesses and their customers will have to pay more for almost everything,” she said.

The professor of international economics points out that while large consumers of seaborne goods have the ability to negotiate better deal terms and incur additional costs, small importers and exporters – especially in poor countries – rely on these companies to move everything from electronics to clothing to food and materials It cannot be chemically processed, and these costs are easily passed on, which means a new round of inflation in those countries.

Impact on capital

According to a study by the Chamber of Food Industries of the Federation of Egyptian Industries, small and medium-sized companies in the sector were hit hard after the rise in container prices last year, due to the erosion of 50 percent of the capital of exporters as European buyers were reluctant to bear the high costs.

Omnia Helmy commented, “It’s not just business survival at stake. If nothing is done to reduce freight rates amid concerns about the Ukraine crisis, inflation and food security risks could increase dramatically.”

According to a study by the US Federal Reserve Bank of Kansas, increased freight costs are a thorny issue rather than a temporary one.