Over the past 19 months LOFA has constantly been reporting on the operational issues faced by its members and the industry as a whole. It had hoped these issues would have lessened and the industry could have gained some respite but, according to the association, it seems these problems are now escalating even further.
LOFA can report there is yet another increase in freight rates being levied at the industry, and the new FAK* rates from Asia to North Europe are now edging towards $20,000 per 40ft container – this represents a massive 1,566% increase in the space of 19 months.
These increased rates will of course have a major impact on importers, retailers and consumers.
Retailers will not be able to sell stock if the retail prices have to be increased due to the jump in these shipping costs.
Importers will find themselves trapped, having to pay 16 times more for freight than last year and it would not be unlikely to expect some companies to flounder in 2022 if this situation is not resolved.
Considering many of LOFA’s members have to bring in 50-plus containers in a season this is a huge amount of extra funding they are having to generate.
Example
2021 - 50 containers @ $20,000 per 40ft Container $1,000,000
2019 - 50 containers @ $1200 per 40ft Container $ 60,000
Extra funding $ 940,000
LOFA members have tried to absorb these costs where they can, to assist their customers, but the association says this will no longer be possible with such a massive increase.
LOFA says the whole market is in bedlam and there are many defining factors causing this issue, price increases aside.
- Finding empty containers is exceedingly difficult.
- Factories are producing product but are running out of storage space because there are no free containers to load the products on to.
- There is a new outbreak of Covid which is affecting the southern China Ports where there were reported to be up to 40 vessels waiting to berth last week.
- The availability of containers at these southern Chinese ports continues to deteriorate as carriers omit calls due to a wave of Covid outbreaks in the Guangzhou province. According to the latest data from Container xChange, the ports of Yantian, Shekou and Nansha have been the worst hit by the container shortages.
- There are far fewer empty containers arriving back to southern China as container lines skip calls, and many shippers face long delays or higher prices for equipment if these affected ports can’t be avoided.
- At the moment there are 5 million containers currently in the wrong position in the world and 40% less vessels for June as a result of the Suez Canal issues.
- When products eventually arrive in the UK there is now an issue with moving goods that have docked and cleared from the quay as inland haulage rates have reached new and unexpected heights.
Is it the shipping lines that have colluded together and seized this opportunity to increase prices whilst the demand is strong and are now reaping the benefits for no other reason than they can? Distributors, retailers and consumers are now all paying excessively for this short-term profit gain, in real terms has Brexit, Covid and the high demand helped them to get away with their greed, and are they in effect operating as a cartel? Is there too much control in the hands of the shipping lines?
In light of these ongoing difficulties LOFA have lobbied the Department of International Trade, the Home Office, local government and have also reported this price fixing by the larger freight firms to the Competition and Markets Authority, this report is now with the CMA legal team who are deliberating on a decision. LOFA are hoping this will lead to a full investigation.
*FAK is an acronym used in the shipping industry that stands for Freight All Kinds. According to globalnegotiator.com, they are rates applicable to all types of goods and not restricted to any particular commodity.
