Shipping costs and other increases will drive prices up on consumer goods
Most people have read about world wide shipping delays ( particularly for Xmas) and now, price rises on both shipping and Container costs are being discussed and felt in Australia.
There have been astronomical price increases from shipping lines since April 2021.
The cost of importing a shipping container of goods from Asia has increased by around 350% since 2020.
The ABC reported on this in June : For the first time, the cost of shipping a container on the world’s busiest shipping routes from China to Europe surpassed $US10,000 ($13,513), a rise of more than 500 per cent since June last year………..Over the year to May 2021, the median cost of shipping a 20 foot export container from Australia to China increased by almost 40 per cent to nearly $1,479, according to figures provided by Shipping Australia and Mizzen Group.“
Most retailers have absorbed the extra cost for the earlier part of 2021, but they have now been forced to increase their prices to the consumer. There is no other choice.
Bulky goods such as furniture and white goods are affected the most, due to the amount of space they take up in shipping containers.
Consumers will notice that bulky goods have slowly increased in price over the last three months.
The shipping lines are not willing to reduce their prices until the end of the spending season which starts around March each year.
There is some speculation that the higher price of shipping could become the new norm:
A recent Nine News article stated “Supply chain delays and soaring consumer demand have led to shipping containers backing up at Australian and global ports, meaning inordinately long wait times for consumers and making it much more expensive for companies to ship their goods. That cost trickle-down will hit a variety of products, including food, furniture and clothing, Jackson Meyer, chief executive of Victorian-based freight forwarding firm Verus Global, said”
From an article by Eli Greenblatt ” Australia’s top retailers have welcomed the ACCC competition regulator’s investigation into the five-fold jump in shipping and container costs in the wake of the Covid-19 pandemic, which is set to drive storefront prices higher.
Many believe the hike in container prices was not a “natural phenomenon” and hoped the investigation by the Australian Competition and Consumer Commission would shed light on the apparent shortage of containers and the price of shipping, which has emerged as a major cost pressure for the nation’s $320bn retail sector.
Anthony Scali, the CEO of furniture chain Nick Scali, also welcomed the intervention of the ACCC by kickstarting an investigation into freight prices, and in particular the price of shipping containers.
“The problem is, there are two ways to buy freight, either you deal through a freight forwarder or you deal directly with shipping lines. We always deal with big forwarders and every time you dealt with shipping lines the price was higher than what I could get with a forwarder.
“We know the shipping lines are not always providing the shipping containers when they should, unless you pay a premium price,” Mr Scali said.
“I have had agreements in place (with freight forwarders) that have just been ripped up, because they can’t get to the container, the shipping line won’t give it to them.”
Mr Scali, who warned last month that the rocketing price of shipping would force him to ratchet up his prices to customers, welcomed the ACCC investigation.
“I do, yes, I think someone has to look at it.
“Everyone (retailers) is raising prices already, in furniture lounges are a big volume user so there have been cases where the freight costs are more than the price of the lounge, that’s crazy, at the cheaper end, and you have to pass prices on,” he said.
The Australian reported on Monday that ACCC chairman Rod Sims had confirmed the regulator was investigating the freight sector after a massive increase in pricing that was blamed on disruptions to global supply lines caused by Covid.
“We have an investigation underway on this, there is a limited amount I can say on it, but we are looking at the freight system particularly the role that containers play,” Mr Sims said.
“We are aware of what’s going on with containers, and we are investigating it.”
Wesfarmers CEO Rob Scott also recognised the explosive growth in shipping prices, which has ratcheted up costs and caused delays.
“The pandemic has caused significant disruption in global container shipping markets and we have seen this translate to higher costs as well as delays. We have made changes to our ordering processes to adapt to these disruptions and we are continuing to work with our suppliers,” Mr Scott said.
JB Hi-Fi chief executive Terry Smart said the consumer electronics retailer was a third party as it wasn’t a direct importer, but was facing a shortage of containers.
“Along with potential price rises that the importers may pass on, our concern is capacity. While stocks are being impacted for many reasons such as elevated worldwide demand, chip shortages, factory shutdowns, etc, we are getting feedback that available capacity is a significant issue and is a potential risk to inventory this side of Christmas,” he said.
The latest level for the Drewry’s composite World Container index, a barometer of international shipping charges, recorded the cost of a 40-foot shipping container at $US10,083.84 for September 9, up 309 per cent on the same week in 2020. The 1 per cent gain for the week was the 21st consecutive week of increases.