6 Major logistical factors driving up Malta’s costs (Part 1)

This month, a national survey published by the European Union confirmed what we’re all thinking: Maltese adults are very concerned about rising prices and the costs of living.

It’s easy to blame this entirely on what’s happening in Russia, and while it is a major factor, some of the problems we will highlight aren’t necessarily new.

Back in 2021, the eurobarometer national survey published on the 8th of April also had shown that rising prices and the cost of living were the issues of most concern among Maltese adults.

In addition, 30% of respondents said they expect the situation in Malta to get worse the next year.

They were right, and indeed, confidence in economic stability dropped further in 2022.

Disclaimer: We’re really fast, but we’re not magicians.

We do not have the power to solve these issues with just one article, but we believe that sharing a meaningful understanding of the core problems Malta is facing can help us improve our resilience, pinpoint effective solutions and make the right changes.

Below, we look at some of the most important logistical challenges responsible for Malta’s rising prices.

Malta imports roughly 80% of its food at a time when convergent disruptions have sent food prices soaring.

Ukraine is a critical food supply hub while Russia is the world’s largest exporter of fertilizers.

In Malta, fertiliser importation costs rose by average of 40%. Meanwhile, the Retail Price Index shows an increase of 5.24% in food prices in the 12 months to December, reflecting consumer complaints of rising living costs.

It’s important to note that these hikes occured before the war in Ukraine.

Ukraine and Russia together produce nearly 30 percent of the world’s traded wheat and 12 percent of its calories.

Products Malta imports from Ukraine include oats, maize starch and crude sunflower-seed oil.

Malta imports the bulk of its food from the Netherlands, Italy and the United Kingdom, but these countries themselves import a substantial amount of products from Russia.

For example, the Netherlands imports over €50 million in oil seed, oleagic fruits, grain, seed, fruits, and fertiliser from Russia.

Malta may not get most of its energy from Russia, but imports much of its products from countries that do

Russia accounts for about 40% of EU’s natural gas imports and 27% of crude oil imports. Energy is an input cost in every part of manufacturing.

Malta gets “only” around 17% of its power from the European grid, which means it’s not directly dependent on Russia for natural gas.

However, Malta relies on imports from the United Kingdom (18.47 percent), Italy (16.88 percent) and Germany (6.63 percent).

Unlike Italy and Germany, the United Kingdom is not reliant on Russia for energy, but trade with the United Kingdom has still become more expensive due to Brexit.

In 2020, Malta imported $3.46B in Refined Petroleum, the 1st most imported product in Malta.

$1.86B (over 50%) comes from Russia.

Petroleum products include gasoline, distillates such as diesel fuel and heating oil, jet fuel, petrochemical feedstocks, waxes, lubricating oils, and asphalt.

Freight and fuel prices rose by up to 20 percent over last year.

Meanwhile, the rise in the price of oil in Europe due to the war in Ukraine and its impact on the cost of freight vessels to Malta is affecting 70 per cent of the cargo in and out of the island.

David Fleri Soler, who heads the Malta Chamber’s logistics section and is leading the talks on behalf of importers, told Times of Malta the island is at a disadvantage in the EU.

“Malta is already disadvantaged because it is an island and the increase in fuel at the pump [in the EU] and extra costs on bunkers from the ferry lines put it at an even greater disadvantage compared to other EU countries,” Fleri Soler said.

Malta does not benefit from any preferential treatment due to its geographical position, which Fleri Soler said left the country “at the mercy of shipping lines”.

 

Click here to read the second part of our article where we look at causes beyond what’s happening in Ukraine.