The spiralling cost of shipping goods from Asia is causing a shortage of consumer goods in Europe for importers of everything from home furnishings, bicycles and sports kit to children’s toys and dried fruits.
A dearth of empty containers in China has quadrupled prices on sea trade routes to Europe in the space of eight weeks, with costs hitting record highs as shippers and freight forwarders compete to secure space on vessels.
As a result, retailers and manufacturers told the Financial Times that they were beginning to experience shortages of both finished goods and components.
Youri Mercier, deputy secretary-general at the Federation of the European Sporting Goods Industry, whose members include Nike, Puma and Adidas, said delays of several weeks were having a “huge impact” on businesses. “If winter collections arrive months late, there is a big problem,” he said. “It’s Covid, Brexit and now this.”
Frucom, which represents European traders of dried fruit and nuts, said in a letter to the European Commission this month that one of its members had been quoted $16,500 to ship a 40ft container, up from $2,150 in November.
“Several members have advised that their customers intend to cancel [goods] contracts this year as this destroys the [profit] margin they may have been able to earn,” the letter said. “Some deliveries scheduled for December are only now reaching our companies.”
Halfords, one of Europe's largest cycle retailers, has reported gaps in its stock caused by shipping problems and mentioned freight costs and disruption in its latest trading update, although it said it had better access to manufacturing and transport capacity than smaller rivals.
Steve Garidis, executive director of trade body Bicycle Association, said: “There's been disruption and the cost of securing containers is up to 10 times higher than a year ago.”
Gary Grant, founder and executive chairman of UK toy retailer The Entertainer, said “ridiculous” freight rates were “having a massive impact” on prices. He usually brings in around 50 containers a week from the Far East but “we are about 200 containers behind where we should be at the moment because we cannot justify paying for the shipping,” he said.
Lorenzo Granata, the owner of Nano Bleu, the largest toy retailer in Milan's historic centre, said: “There is less product availability, which explains soaring costs . . . [Online] platforms and shops that are able to secure products that are widely unavailable can pretty much put the price tag they please on those items.”
Peter Sand, analyst at international shipping association Bimco, said higher prices were predominantly “affecting the small importers and retailers rather than the Tescos, Walmarts and Ikeas of this world” which ship more cargo and tend to be prioritised by carriers.
In a survey of 900 small and medium-sized companies conducted by global freight marketplace Freightos, 77 per cent reported experiencing supply chain difficulties in the past six months.
Helen White, co-founder of UK-based home furnishing group Houseof, said the company would not make any profit on goods shipped since December as a result of increased freight rates. “It’s a nightmare. Not only are prices going up, but it’s hard to get a container even if you are willing to pay $10,000,” she said.
Ms White, who paid $1,600 for a container in November, is letting customers reserve stock for future delivery: “If we could only sell stuff in the warehouse, we’d have nothing to sell.”
The supply constraints are also having an impact on production across the eurozone, according to a rising proportion of manufacturers in a survey by IHS Markit published last week. Supplier delivery times lengthened in January by the largest amount since survey data were first available in 1997 — with the exception of April last year, when supply lines were hit by the pandemic.
The European Association for Forwarding, Transport, Logistics and Customs Services and the European Shippers’ Council warned in a joint letter sent to the European Commission last week that “increased freight rates” and “late delivery” meant many of their members were struggling to keep “supply chains operational”.
The European Commission told the FT that Brussels was aware of “large price increases in container shipping markets recently, both on routes to and from the EU and in other parts of the world”.
But it was unclear at this stage whether the situation was the result of anti-competitive behaviour and whether any intervention from regulators might be warranted.
“In the current situation, many factors could be at the origin of the price hikes, such as fluctuating high demand, port congestion, and shortage of containers, in markets which are intertwined at worldwide level,” the Commission said. “We are discussing with market participants to fully understand the current circumstances, and consider ways forward.”
Additional reporting by Jim Brunsden in Brussels and Silvia Sciorilli Borrelli in Milan