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Shipping cost surge causes retail prices to increase

From the effects of the pandemic, one being the high demand for goods around the world, it has caused the price for sea freight to increase not just major commodities such as; raw materials but with the pandemics travel restrictions and thanks to government stimuluses, retail also has dramatically increased and the shortage of cargo containers the congestion and delays of the hipping increases and has caused to pushed up shipping costs.

Prices were increase by some major retailers such as Reject Shop due to the double or triple price cost of important goods. These implies that if retailers starts to increase the freight and input cost the prices for products like canned food, shoes, clothes and computers would also increase.

Freight costs surge for importers

The company Plasdene Glass-Pak is a national plastic and glass container that is based in Western Sydney has grown rapidly after a year from the start of the pandemic. With customers from multinational companies to stallholders that makes jam for farmers markets.

The costs for freight has increased from 20 to 50 percent over the past year which is according to Jayne Pearson the general manager of the company.

“So across the last 12 months, it would be in the vicinity of hundreds of thousands of dollars additional that we’ve incurred in importation costs, and associated tariffs and surcharges,” she said.

“It’s obviously COVID impact, huge demand for more shipping. So increased demand, but at the same time reduced capacity.”

Ms Pearson said some customers were paying very high rates for some routes including a UK client who imported products from China.

“Now they’re seeing more than 840 per cent increase from China to the UK. That’s gone from around $US1,500 to more than $US15,000.”

She said the situation had forced Plasdene to increase its prices to customers.

“We shopped around as much as we possibly could, but ultimately there’s only so long we could absorb those costs, so reluctantly we did go to market with an increase this year, but it was a heavily subsidised increase,” she added.

Tin can prices increase

The price of tin can rises by 30 to 40 percent over the past six months which is according to David Buchanan from the Australian Steel Association. “The impacts will come down the track,” he said. “Canned food prices will have to go up.”

Sky-high cargo costs

A 20 foot export containers shipping cost from Australia to China has increases at almost 40 percent which is nearly $1,479 which is according to the data provided by the Shipping Australia and Mizzen Group. At the beginning of the pandemic the cost of shipping from Australia to China rates were $1,370 per container but importing good from China cost much more.

According to Drewry Supply Chain Advisors, Shanghai o Rotterdam is the most expensive trade route which has a spot rates for a 40 foot container and the cost has increased by 518 percent since June last year to $US10,462 ($13,513). And according to digital global freight booking platform Freightos the shipping a 40 foot container from Shanghai to Sydney on the spot market has doubled the cost from a year ago to $US4,307 ($5,563).

Missed ports

An action to minimise the impact of port congestion by skipping ports of call and cancelling planned sailings has been the topic among the Shipping companies. But it can add delays for the business, with Ms Pearson giving an example of aa shipment that was diverted to New Zealand and took weeks to get back to Australia.

A huge demand for freight and the rising expenses which cost a running cargo ship to more than $92,000 a day, fuel not included, said by Melwyn Noronha the Shipping Australian chief executive.

“The demand has surged as a result of COVID and that has created a huge demand for goods, and those goods have got to be transported on a ship,” he said.

When a huge cargo ship were stuck in the Suez Canal in Egypt in March causes the trade congestion to worsened along with the port logjams when some Australian exporters were caught up in the trade tensions with China.

Exporters struggling

Australian businesses potentially lost billions of dollars due to the delays and higher freight expenses which is according by Paul Zalai from the freight & Trade Alliance that represents the importers and exporters.

“We’ve got one major exporter now who was very happy with finally getting rains after years of drought. They’ve got they’ve got a bumper crop of 20,000 tonnes of chickpeas, but they can’t get capacity on any vessels to get to overseas markets,” he said.

Exports gets more profit from shipping lines that picks up empty containers to transport goods with a more profitable routes from China to Europe or the US.

“We’ve got a situation where there’s empty containers in these ports, and it’s a struggle to get them back to the manufacturers back in China and other parts of Asia in a timely fashion,” he said.

Shipping industry tries its best to get around the logjams which is according by Melwyn Noronha the Shipping Australia chief executive.

“Australia is predominantly an importer of goods, so you’ll have an excess of empty containers, and the shipping lines, I can tell you, in the last 12 months have been working tirelessly in getting those containers out of this country,” he said.

He said that poor productivity at the Australiaan ports causes delays that was worsened by industrial disputes.

“There’s a buildup, there’s a buildup of these empty containers right across the world, because of port congestion, and I think port congestion needs to be looked at very carefully.’

“It’s the landside logistics that we need to look at very carefully to get their act together.”

Call for price regulation

A call for the regulation of the shipping industry like in the US were discussed by Mr Zalai and Trade Minister Dan Tehan, where there is a Federal Maritime Commission.

The Productivity Commission is investigating vulnerable supply chains in Australia.

“So what we do need is just some level of regulation to make sure that pricing here isn’t artificially being inflated, and that again, there’s enough safeguards in place to ensure that surcharges are reasonable,” Mr Zalai said.

Mr Noronha disagrees. “There is absolutely no economic justification to regulate the shipping industry,” he said. “It’s a huge industry where you have multiple players competing against each other.”

Until the global economy slows down the high shipping expenses for businesses will stay.

Article from abc.net.au

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