Businesses have this week been commenting on the fact that a global shipping crisis is causing freight costs to soar. This could result in significant price rises for imported goods, especially those from the far east for UK consumers.
Delays at the ports exacerbating shipping crisis
On top of rocketing shipping rates, carriers are adding congestion charges for imports into Felixstowe and Southampton because of severe delays – some as long as three to four weeks. The logistics industry has written to the Department for Transport calling for it to help clear port backlogs.
One freight director described the situation by saying that the UK’s ports are currently “broken”. There are also reports of large quantities of containers of PPE jamming the ports.
Global shipping schedules were disrupted during the early stages of the pandemic when factories closed. Recent surges in demand as imports catch up, coupled with a backlog of empty shipping containers, are causing bottlenecks at UK and European ports. As reported on the BBC news website, this could be due both to “pre-brexit stockpiling” and the fall out from the pandemic.
According to one industry source, the situation is “scary”. He went on to say, “I’ve always been able to find a way to keep the business moving, but if I can’t find a way to move the goods into the UK, then that’s when the business stops. We used to pay $1,000- $2,000 to ship a 40-ft container to the UK, now we’re paying at least $8,000 up to $10,000. So, as our items are bulky, it means a 33% increase in landed costs which can translate to 100% at retail. Ultimately that means we’re going to have to stop importing or we’re going to have to pass that on somewhere.”
He added that it’s “near impossible” to get goods out of China now because fewer vessels than normal are sailing to the UK and there is also a shortage of empty containers ready to be filled in Chinese ports.
Sources have reported that major shipping lines have told UK importers no more bookings can be made for ships sailing from Asia until the last week of December – if at all. This is high season as normally demand for shipping is at its highest point in January.
The ‘plunging pound’
This backlog affects all stakeholders, without taking into account the effects of a potentially plunging pound off the back of EU Trade negotiations.
The outcome of this is firmly with our industry now, as we hear of more and more brands writing about delays to dates for delivery. One retailer told our source they had received seven letters this week informing of eight weeks’ delays for orders. They said they fear a scenario of losing a sale when a product simply isn’t there in time.
The upcoming shut down for Chinese New Year could impact the situation further, so the opportunity presents itself for bricks and mortar stores with good stock levels to attract business on the basis of availability rather than discounted prices.