In a continuing series of comments on the hot topic of shipping costs and freight, Tradestock’s managing director Keith Nye provides this analysis of the current situation:
“The unprecedented rise in costs of shipping long haul containers in late 2020 has sustained through 2021 and is likely to maintain at least through to – and very possibly beyond – Chinese New Year 2022.
“It seems after Brexit and Covid, this is the third element of a perfect storm. The root of the problem appears to be buried deep between global trade treaties and the shortage of containers, in part due to rejected PPE products standing in ports around the world, together with an increase in demand for consumer goods during a pandemic where consumers money usually spent on travel has been redirected towards the home, cars and jewellery, if you believe the press headlines!”
Keith continues: “The net effect of increased shipping costs is now becoming evident when you look at certain retailers’ shelves that are bare of value driven long haul product. Low value, high metric volume items have largely become neutral or uncompetitive compared to alternative locally made products. The knock-on effect is a significant price increase in some entry level products, long haul due to shipping costs, short haul due to manufacturing costs, where the decision to go in either direction can be marginal.
“Inertia in making these choices is leading to potentially far more long-term gaps on retailers’ shelves. The dilemma is a gamble for suppliers and retailers alike, wondering how long the shipping lines will be able to hold prices typically at $20k per 40ft container from China, and not wanting to lose out in the rush to more price stable, shorter haul sourced products for the midterm.
No doubt the stakes are currently very high and there will be notable winners and losers in this shipping costs lottery!”