Ocean shipping crunch hitting UK retail sales

The ocean freight shipping ‘crunch’ of tight capacity and a dearth of available containers is having a tangible effect again on UK retail markets, with multiple anecdotal reports of stock shortages and disrupted supply chains similar to those experienced at times in the fourth quarter of last year – or even worse.

Following months of disruptions to ocean freight supply chains, The Times reports today that Britain is experiencing serious shortages of many popular products ranging from computer consoles to printers, garden plants to cement, as shops struggle to meet demand amid supply problems. It quotes retailers as saying that supply chains have yet to catch up from the disruption caused by Covid-19 and the blockage in the Suez Canal in March, while shortages of some components, such as semiconductor chips, have exacerbated the problems.

For example, none of the UK’s five biggest electrical retailers – Currys, Amazon, Argos, John Lewis and AO.com – has the PlayStation 5 or Nintendo Switch in stock, while almost a third of washing machines and more than fifth of ultra-HD smart TVs are unavailable at AO.com, the newspaper highlighted. Home office supplies are also running low, with three of the top five printers out of stock at online printing specialist Printer Base.

The reports from retailers reinforce anecdotal reports from freight forwarders, with one indicating this month to Lloyd’s Loading List that the current disruption within ocean freight markets is worse than it was towards the end of last year, “and causing more issues”, noting that “the situation has worsened and will impact end consumers more than originally thought”.

In an interview with Lloyd’s Loading List earlier this month, Peter Wilson, group managing director of logistics and maritime service provider Cory Brothers, said that one of the key factors in the squeeze in ocean capacity reaching critical proportions and keeping rates at “untenable” levels is strong demand for cross-border e-commerce consumer goods – which has its origin in the lockdowns triggered by the pandemic.

“In the UK, as elsewhere, COVID has spawned a sustained, online buying frenzy particularly for China/Asia-origin goods in the home and garden, DIY and leisure equipment segments, which appears to show no sign of waning.” He highlighted anecdotal examples of retail price hikes, arguing that “a principal factor in these is that ocean freight rates are extremely high. The ‘perfect storm’ in ocean freight is now impacting end-consumers.”

Cory Brothers’ group marketing and procurement manager, Mike Bowden, revealed that the company had a number of SME customers that have got stock sold, ready to be distributed in the UK, but the goods can’t leave China because of a shortage of containers, while others were unwilling to ship goods at prices amounting to upwards of US$15,000 per feu for guaranteed space.

He highlighted one customer that was willing to pay whatever was needed to fulfil their orders on a short-term basis, noting: “They’ve given us the freedom to go up to as much $20,000 per 40-foot container – which is a ridiculously high level; and we’re not talking particularly upmarket expensive goods here,” Bowden noted. “But this is the situation we’re in.

“And so, what we’re finding is that our importers, our customer base, are either being hit massively in passing that (the box rate) on to consumers, or pulling back and waiting for rates to cool down but running the risk of losing business.”

Part of the problem in the electrical category is the difficulty manufacturers are having sourcing semiconductor microchips, which are essential for the operation of almost all products, The Times noted.

The shortage was triggered by the pandemic, which at first caused manufacturers of electrical items to reduce their demand for semiconductors prompting chip-makers to cut production. Then as the demand for electronics rose as people spent more time at home, factories struggled to scale up production. 

It added that industry executives have predicted chip shortages could last from six months to two years.

In an opinion article published last week in Lloyd’s Loading List, David Snell, managing director of UK forwarder, Atlantic International Freight Services wrote that in his 44 years in shipping, he had “never seen anything like the current situation”, highlighting that “nearly all shipping lines, on most trades, are booked full many weeks ahead”, with rates on Asia-Europe routes “rising within three months by over 500% to record high levels”. He added: “Now the transatlantic market rates (westbound) are increasing as all carriers are full.” 

Highlighting that equipment availability “has been another huge problem in some areas, particularly China and South East Asia”, Snell added: “I have never seen demand for container space like this before,” noting that his company “is being contacted on an almost daily basis by customers, expressing anxiety about rates”.