Sea freight, postal service providers in S’pore charging more after Middle East conflict: Singstat
This is based on an analysis of producer prices, which are charged at the wholesale level and could indicate future consumer price hikes.
Singapore's transport and storage sector is charging higher fees for their services following the Middle East conflict, according to the Department of Statistics (Singstat) on October 28. This price surge was notably observed in the sea freight, freight forwarding, and postal and courier segments, based on an analysis of producer prices by Singstat in its latest newsletter.
Producer prices indicate the amount businesses earn for goods and services sold at the wholesale level. Higher producer prices do not immediately affect consumers, as retailers may absorb the additional cost or adjust prices to maintain stability. However, rising producer prices can signal future price increases for consumers. The Middle East conflict, which began on February 28 with the Iran war, effectively closed the Strait of Hormuz, a crucial route for transporting around one-fifth of the world's oil and gas.
This closure caused an index tracking imported fuel and material prices to jump by nearly 79% month-on-month in March. While the index has since eased, it remains above pre-conflict levels. The extent and timing of price adjustments differ across transport and storage activities, influenced by factors like fuel exposure, route exposure, contract terms, and firms' pricing flexibility.
Sea freight faced the largest increase in producer prices, surging by 25.4% in the second quarter compared to the first. Shipping activities involving liquid bulk and gas freight were most affected due to their dependence on the Strait of Hormuz, with shipments of crude oil and liquefied natural gas being most impacted. Container shipping companies, mainly operating outside the Middle East, faced less direct impact but could still experience indirect costs from higher bunker costs and broader shipping disruptions.
Freight forwarding also saw significant price increases, with producer prices rising by 10.2% in the second quarter from the previous quarter. Air freight forwarding faced immediate cost pressures due to flight rerouting, reduced capacity, and higher fuel costs, while land freight forwarding prices remained relatively stable. Postal and courier prices increased by 7.1% in the second quarter compared to the first, reflecting higher fuel-related costs affecting international services.
Local postal and courier prices, however, eased. The indices help businesses and policymakers understand emerging price pressures that may eventually be passed on to customers. While the Singapore government has introduced support packages for businesses and households to manage cost pressures, ongoing monitoring of producer prices remains crucial due to evolving global developments.
Oil prices are currently trading slightly below six-month highs, peaking at over US$117 (S$150) per barrel on October 23 after Iranian attacks on tankers near the Strait of Hormuz.
Written by urgent.news from Straits Times Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
