Supply chain problems continue as buyers told to close hatches until 2022
COMPANIES CALL ON Irish consumers to be flexible and prepare for supply disruptions until 2022, fearing the global shipping crisis may ease this side of Christmas.
A range of factors, including a shortage of freight containers, booming global consumer demand and congestion in ports around the world, have conspired against global supply chains and are pushing transportation costs down on businesses. Irish.
Smyths Toys has already advised Irish Christmas shoppers to buy early this year to avoid disappointment.
Released in recent days, a new report from Woodland Group – a UK supply chain management and consulting firm with a major presence in Ireland – has highlighted the challenges facing Irish importers.
Asia-Europe trade is particularly affected by the disruption.
This week Soren Skou, managing director of Danish shipping giant Maersk, told Reuters that the crisis is expected to continue to weigh heavily on world trade next year.
“There is no silver bullet” to the global disruption, Woodland warned, and businesses and consumers can expect shipping delays and prices to remain high until at least the Chinese New Year. in February 2022.
Irish toiletries and furniture companies have seen the cost of shipping goods from Asia rise by at least 25-30% in the past 15 months, according to the report.
Some business owners say the increases have sometimes been even larger.
“I’ve never seen anything like it,” said Richard Sloan, Managing Director of Sonas Bathrooms, based in Dublin. The newspaper.
About 40% of his company’s shares are imported from Asia, Sloan explained.
“Before Covid, we would have brought in a 40ft container from China for somewhere in the region of $ 1,500 to $ 2,000. Lately we’ve paid a shipping charge of $ 18,000, ”he said.
Peter Caffrey, owner and operator of Caffrey’s Furniture and Interior Creations in Oldcastle, Co Meath, said he was also quoted as $ 18,000 for a container, up from around $ 2,500 before the pandemic – and that’s just to get in. in the queue.
“We have stuff ready to go, but we can’t get an empty container to put the stuff in,” Caffrey said. The newspaper. “The material has been ready in the Chinese factory for us for almost four weeks and we are lining up to get a container.”
“It sounds cheesy, but it’s literally the perfect storm,” said Kevin Brady, managing director of the Irish branch of Woodland Group. The newspaper.
“There were a lot of factors, but it all started with Covid and, in fact, it was just a domino effect. “
An initial shock when the pandemic struck last year was followed soon after by a boom in shipping demand as consumers embraced online shopping. That momentum snowballed in 2021 thanks to a ‘sugar rush’ in consumer activity as economies reopen and households begin to unwind savings accumulated during lockdown periods.
“There is just too much demand for ships,” he said, and port infrastructure “cracks” as a result, causing delays.
The increased demand for shipping has also exacerbated the global shortage of freight containers, Brady said.
Last year, due to public health restrictions in China and other major economies, 500,000 shipping containers were stranded in US ports “when they should have been in Asia,” he said. .
An accumulation of containers in ports means longer waiting times for ships seeking to dock. Longer waits for berths mean disrupted shipping schedules, causing a ripple effect of delays around the world.
At one point last week, a record 56 ships were lining up to enter the port of Long Beach in California, one of America’s major transportation hubs.
European ports have had similar problems, which has been particularly troublesome from an Irish perspective, Brady said.
Rotterdam and Antwerp, which are Ireland’s main supply ports, are blocked. It doesn’t matter whether you import goods through these ports or export through them, there is huge congestion.
“It’s really not just one thing, it’s one thing after another.”
Some companies have been able to cope with the delays and absorb the additional costs associated with transporting goods.
But Peter Caffrey said the crisis is definitely having an impact on his day-to-day operations.
“Transportation has a big effect on your cash flow now, because a container that would have cost $ 3,000 15 months ago now costs $ 18,000 – that’s an additional expense of $ 15,000 on your transportation costs,” he said. he declared.
There is growing concern that these additional costs are starting to hit consumers and worsen inflation.
This week, Central Bank of Ireland Governor Gabriel Makhlouf said supply bottlenecks illustrated that “the economic experience of the pandemic and the road beyond is not uniform in all sectors “.
Many economists and policymakers – including Makhlouf and European Central Bank President Christine Lagarde – expect these inflationary pressures to ease over the coming months.
But “considerable uncertainty remains,” warned Makhlouf.
Overall, Caffrey is relatively positive about the outlook – shipping prices can’t go up much more, he said. Last week, for example, French shipping giant CMA CGM announced it would freeze spot freight rates for a six-month period until the crisis begins to subside.
No news is bad news
Support the journal
Your contributions will help us continue to deliver the stories that are important to you
Support us now
Richard Sloan, meanwhile, has also said he can see the bright side.
“I am very aware of having too negative a turn on this story,” he said, because “the demand has remained very high”.
He added, “As a company we’ve done well, we’ve adapted very well, and we have a diverse global supply chain.
While some of its competitors are more dependent on China, Sloan said Sonas “has kind of been able to absorb some of these increases by spreading the costs across our foreign product portfolio.
Brady said this type of diversification is emerging as a major trend in Ireland.
Given the shipping disruptions and Covid-related port closures – which continued into the third quarter of 2021 with a stop in Ningbo – many importers are looking for new suppliers.
“We see a lot of our customers talking about different alternatives – Europe, Turkey, Eastern Europe,” he said.
Now, that can never replace China, really, just because of the sheer volume of goods coming from there. But the folks who were sourcing only from China looked at it – and if they didn’t, they should definitely look at this strategy because we don’t know how long it’s going to last.
How long can this last, in theory?
“That’s the six million dollar question,” Brady said.
Woodland is “very confident” that the high rates, delays and disruption will be a feature “until the Chinese New Year, which is in February,” he said.
In reality, it could be the second quarter of the year before things start to balance out.
In the meantime, Irish buyers are urged to be patient and flexible given the difficulties.
“Start your Christmas shopping now,” Brady said.
Consumers must “be flexible in their product requirements,” Sloan added.
“What I mean by that is we have multiple product categories, but we have a lot of variations of the same product,” he explained.
“You might want Product A, but we might not have it in time for when you need it. But we will be there to offer you Product B, which will be a very close alternative.