Dean Simpson, operations director at Pentland Wholesale, reports that soaring freight costs, the Covid-19 pandemic disruption and pre-Brexit stockpiling have created the perfect storm for catering equipment importers:
In recent weeks and months, reports of a global shipping crisis have appeared in various media outlets, and recently on 22 January the BBC reported: “Shipping crisis: I’m being quoted £10,000 for a £1,600 container”. As many importers will already know, these costs are unprecedented and so this is an accurate report.
This crisis is proving very difficult for all importers, not just those within our industry. Since Q3 of 2020, continuous price increases have seen freight costs soaring. Typically, a 40ft container from China is now being quoted at over $12,000 more compared to previous costs. And the challenges don’t stop there – to add to the problem, even if these exorbitant costs are accepted there is still no guarantee of securing a container.
Why is this happening? For businesses operating within the UK there are two predominant reasons: firstly, due to the Covid-19 pandemic the normally balanced flow of shipping containers within the global supply chain has been seriously disrupted – all over the world there is a stockpile of empty shipping containers that are not where they should be. This has resulted in a serious shortage of empty shipping containers in Asia, creating demand beyond supply and therefore the soaring costs.
Secondly, on a more local level, bottlenecks at the UK’s deep-sea ports created by increased bureaucracy for businesses trading with the EU after Brexit have resulted in unprecedented delays releasing containers for onward transportation. This problem was exacerbated towards the end of Q4 2020 because many businesses wanted to beat the Brexit deadline, which subsequently created a spike in demand for shipping, and ultimately resulted in major disruption for us in the UK. Perhaps not the best analogy when discussing shipping lines, but these two issues created the perfect storm.
The global shipping crisis and localised UK issue will not only lead to a potential shortage of some products for the UK market but will also inevitably force businesses to pass on these increased costs to the end users. This issue will be applicable to all products that rely on being imported, but in particular those sourced from China are feeling the brunt of the problem.
Within our own specific industry we are also facing further pressure from increased costs relating to raw materials, such as foaming, steel and copper, and for goods produced in the Far East, manufacturers have had the added pressures relating to the RMB/US dollar exchange rate.
Where possible, we have worked hard to absorb these unprecedented additional costs but unfortunately have had no other option but to implement a price increase from 1 March. Pentland Wholesale is not the only importer to announce a price increase and will not be the last, as everyone within this field fully appreciates the problems faced, although it’s vitally important dealers within the industry also understand the situation and are prepared.
As things stand, we believe these conditions will last for several months, however, we are constantly monitoring the situation and as soon as these pressures ease we will react accordingly.