NEWS

Shipping rates and port congestion continue to cause concern for suppliers

Published on: 8th December 2020

Container spot rates from Asia to North Europe are now 130% higher than at the start of the year, after a further spike last week.

shipping

Shipping rates have continued to rise steeply, due to a perfect storm of conditions: there is not sufficient equipment available, space is tight and suppliers have cargo that needs to move. As a result, carriers are said to be focused on maximising their freight earnings at the expense of all other agreements. According to one source: “Carriers will give priority only to higher rate space – whoever is prepared to pay more gets the space.”

Prices have risen from £2100 for a 40ft container in October to around £6400 currently. Some have even estimated that the rate could rise as high as £10,000 in January. There is genuine concern that these major price hikes will have a significant impact on product availability, as many suppliers will struggle to absorb the increase, while retailers are likely to push back on cost increases due to the prevailing retail climate.

One concerned observer commented: “At a time where every penny counts and retail is trying to get back on its feet, the impact of these increases, alongside the complexities in import through Brexit, will destabilise many product sectors over the next six months at least.”

Holly Stafford-Smith, director at Wotch Creations, which has just started supplying the toy trade with its collectible Smiley Halves range, commented: “I’ve been involved in importing for more than 13 years and the most I’ve ever known is $6k for a 40HQ, and even that was considered extreme.”

Supply chain specialist Richard Brooks, from Far Logistics Manchester, told Toy World: “It will be like this until after Chinese New Year – with reduced space, a lack of containers and increased rates. Anyone not factoring in additional costs to the supply chain for 2021 really needs to do that, along with additional transit times as port omissions at origin and port congestion in the UK are causing delays of a week or more. After what has been a race to the bottom for years on deals, I suspect that 2021 will not be so easy, with shipping lines increasing Peak Season Surcharges – one in particular is charging $1000 per TEU from Dec 15th. It looks like rates will top over $8000 for January.”

Some people have gone so far as to question whether this situation could lead to some suppliers reconsidering their supply chain strategy, and even moving production away from the Far East, but as sourcing specialist Ger Murphy from Vantage Choices points out: “This is just not commercially viable. This is a one off freak increase: to move production would take 5 -10 years and it would involve huge investment and much higher production costs. Suppliers just need to ride out the next four months – this is undoubtedly the most viable option, as all competitors are in the same boat, meaning that nobody has an advantage over anyone else.”

There is also ongoing concern over the shipping companies’ approach, as Ger explains: “It’s interesting that freight companies all seem to be charging exactly the same increases. This is a trend that has been constant for 30+years. If there was more competition on ocean freight and less private meeting between the shipping companies, this arguably would not have happened. Retailers and importers take ups and downs and accept the situation. But when shipping lines have problems because they don’t want ship back empty containers, they make all their customers pay. That’s not right, but ocean freight is essentially anti-competitive, so I complete understand it.”

It also appears that pricing is not the only challenge facing importers, with ongoing congestion and hold-ups at UK ports leaving many shipping lines unable or reluctant to attempt to dock. Flexport’s Steven Field commented: “The price is one thing, but it still doesn’t encourage carriers to call at the UK due to port congestion. We’re coming to the stage when suppliers will probably have to look at feeder services from Northern Europe to get anything in from Asia, until Southampton and Felixstowe can improve their situation.”

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