I make no apologies for returning to the thorny subject of shipping this week: unsurprisingly, this ongoing issue is dominating most toy conversations at the moment. One of the few positives about the situation is that just about everyone is in the same boat…literally.
This week has seen container rates spiraling once more, with prices on the Asia to Europe route reported to be edging towards $20,000 for a 40ft container. As a result, it seems that some retailers are postponing or cancelling orders, seemingly in the belief that this will all blow over in the coming weeks / months and they’ll be able to reinstate their orders at a lower rate. Now, about that…
After we posted the original story on LinkedIn, we had numerous replies confirming that many buyers across the globe are indeed in a quandary about what to do, with some pushing the pause button on deliveries. One respondent based in the Far East said: “We have one retailer with 14 containers waiting to be shipped, because they are waiting for cheaper prices. The same retailer is putting pressure on us to confirm an order for August shipment and all Q4 shipment orders. What to do?” Someone from Israel posted: “I had companies here delaying when the cost was $8000, and now its $17000. There is no choice but to take the products as soon as they are produced. No stock=no sales.”
In a nutshell, this is pretty much spot on – I bet the company which postponed orders when the container price was $8000 was kicking itself when it doubled. And here’s the news I doubt any of you want to hear; I spoke to someone who works in sea freight sales for the world’s largest shipping company this week, and it is his considered opinion that prices have not peaked yet. He sees August as the likely pricing nadir and believes that…wait for it…rates could hit $25,000-$30,000 over the late summer period, as festive stock starts to flood in. And as I have suggested previously, while prices will eventually correct, it is his belief that this is unlikely to happen for a good while yet – certainly not this year, and maybe not even in ’22.
The general feeling seems to be that conditions are not likely to change dramatically until the new vessels that have been ordered by carriers are ready to launch, which will help to relieve the current capacity issues – and that is widely believed to be 2023.
I am sorry to be the bearer of bad news. Of course, this is just one person’s prediction – but in fairness, he is well-positioned to know what he is talking about. I pondered over whether to share what he said, but decided it is better to put it out there, so people can at least do some further investigation with their own service providers and also factor this potential outcome into their planning.
To add insult to injury for our UK-based readers, it also appears that despite the sky-high container rates, UK business is not particularly attractive to some container lines. Apparently, the imbalance of trade – with a ratio of four import containers for just one export – is causing certain carriers to favour other routes with a better balance between import and export, to help make sure that containers are in the right place. Industry sources suggest that UK ports are the first to be omitted on an ad-hoc basis when carriers want to reboot their networks, while some of the Asia-North Europe alliance lines are even rumoured to be in favour of the UK being served permanently via feeder services from Antwerp or Rotterdam.
So, what is the upshot of the ongoing disruption in China and absurd shipping price rises…could it all lead to product shortages, price rises or non-deliveries (or all three)? Very possibly. On the other hand, if you are a toy company with stock already on the ground or on its way, you could be in a strong position. If last year saw the toy community encouraging consumers to shop early for Christmas to avoid disappointment, this year may well see that message needing to be repeated…on steroids. Apart from the occasional story – most of which almost downplay the gravity of the situation – the mainstream media has yet to pick up on these developments in any meaningful way, so in the main, the public remains blissfully unaware of what may lie ahead over the coming months.
Away from shipping lanes, there has been plenty of other news this week: hearty congratulations to all those who participated in the Toy Trust’s Around the World in 80 Hours event over the past week, which has so far raised over £20,000 for its charity partners, and to Andrew Laughton who has just completed a mammoth 110km trek in aid of both the Toy Trust and the Fence Club, which you can read more about here. We also wish all the best to Casdon’s Roger Howard, who has retired after spending an incredible 45 years with the company – from starting as an office junior at the age of 16, he must have seen so many changes, both at Casdon and in the wider toy market, over his illustrious career. Elsewhere, I understand that Jacqueline Taylor-Foo has parted company with Melissa and Doug, while Julia Cake will be leaving Magic Box for pastures new today. Her replacement will be unveiled soon, while there are a couple of other impending announcements about high profile appointments which we look forward to bringing you shortly.
Finally, I wanted to bring you some news to cheer you up after the relentless barrage of challenges business is currently facing. So how about this: it turns out that China didn’t have a leak at a nuclear power plant in Guangdong this week after all. No, it turns out that reports of a leak just around the corner from where a very large percentage of the world’s toys are made were exaggerated. Admittedly, five fuel rods broke in the reactor, and while I am not a nuclear scientist, I am guessing that probably wasn’t ideal. However, the rise in radiation was apparently contained and contrary to reports on CNN, there was no leakage into the environment. So that’s good news – after the year we’re having, a nuclear incident in the heart of global toy production would have been the icing on the cake. So thankfully it’s as you were, nothing to see here – just the small matter of meltdown in the global logistics chain to deal with after all. Phew.