The recent surge in freight container shipping rates to levels not seen since the worst days of the global pandemic are creating difficulties for businesses of all types, prompting retailers to review their pricing and place orders much earlier than they would like.
Darts Corner supplies darts equipment to more than 100 countries. Most of its own branded products come from China and containers typically take 45–60 days to arrive.
“The shipping quotes we have received in the last month or so have doubled from what they were in Q1,” says Managing Director Craig Heenighan. “It’s not quite the pricing we became accustomed to in and around the pandemic, but it is certainly more expensive now than it was before the pandemic.”
He observes that some containers are taking up to 90 days to arrive, which is having a knock-on effect on the company’s downstream supply chain.
“We have wholesale customers and consumers wanting and expecting our products during the busiest period, which are taking too long to arrive,” says Heenighan. “We haven’t had to drop any product lines, but we have had to endure periods of being out of stock.”
The company had to increase its prices on two occasions during and shortly after the pandemic and Heenighan acknowledges that it will have to review its pricing again in the very near future.
Party supplies and decorations provider Partyrama has seen the cost of shipping products from China increase almost five-fold since the start of this year explains CEO Nitin Bajaj.
“Orders from Europe usually take three to ten days depending on the service and country while from China they usually take four to five weeks,” he says. “Shipping costs from Europe have only increased marginally and are in line with the usual seasonal peaks and troughs. However, shipping costs from China have increased massively – we had rates of US$1,500 per container at the start of the year and are now paying around US$7,000.”
As well as being more expensive, these containers are taking longer to arrive. The average is now around nine weeks, but Bajaj says there have been occasions where containers have taken 11 weeks to travel from port to warehouse.
“The impact on our business is massive,” he continues. “We work to a four month forecast and there was a period in March where we were out of stock of our top selling product for two weeks. This cost us over £200,000 in sales during an already challenging period in terms of the impact the cost of living crisis has had on the party industry.”
Bajaj is concerned that if this carries on, there will be an issue with supply of products in time for Halloween. “Usually we take delivery in July, but many of our suppliers are now saying this will be in August – which does not give us enough time to process and market the items for sale on our site,” he adds.
The company has had to increase costs on many lines as a result of increased shipping costs and is also seeing this from its other suppliers.
Peter Sand, Chief Analyst at ocean and air freight rate benchmarking and market analytics platform Xeneta warns that the dramatic increase in ocean freight container shipping rates seen in May is set to continue and says the speed and magnitude of this recent spike that has taken even the CEOs of the world’s biggest ocean freight liner companies by surprise.
“The most straightforward way to protect supply chains is to ship as many of your goods as you can as quickly as possible,” he says. “That is what we are seeing with some businesses telling us they were already shipping cargo for the Christmas period in May.”
Sand says carriers will prioritise shippers paying the highest rates. “That means cargo belonging to shippers paying lower rates on long term contracts is at risk of being left at the port. We are also seeing freight forwarders being hit with new surcharges and being pushed onto premium services to have space guaranteed on board ships. Carriers will continue to push for higher and higher freight rates so the situation may get worse for shippers before it gets better.”
