Finance Consumers told to brace for retail price shock as global shipping slows down
Updated:

Consumers told to brace for retail price shock as global shipping slows down

Retail cost shipping containers
Higher shipping costs are expected to push up prices for consumer goods. Photo: AAP
Share
Twitter Facebook Reddit Pinterest Email

Consumers are being told to brace for a major jump in retail prices amid reports of a 400 per cent increase in shipping container costs.

A combination of soaring demand and transport disruptions have triggered large rises in freight costs and massive delays in the shipping of consumer goods into Australia.

In-store prices have yet to feel the effects of the supply chain bottlenecks, but analysts said it is only a matter of time until retailers pass on the higher costs to consumers.

“In a recent straw poll of members, we found that almost half had experienced freight cost rises of 20 to 50 per cent,” said Louise McGrath, head of industry development and policy at the Australian Industry Group.

“[More than] 20 per cent of companies had experienced over 200 per cent increases.”

Peter van Duyn, a shipping logistics expert and researcher at Deakin University, said those cost rises paled in comparison to the increases seen across the shipping market more broadly.

Mr van Duyn said the price for container space on board freighters over the past year or so had gone up by 300 to 400 per cent.

National Institute of Economic and Industry Research CEO Peter Brain predicted the extra shipping costs would add half a percentage point to the annual inflation rate.

“It’s a function of two things,” he said.

“The variability of supply – and when supply does become available, it comes at a price.”

Not only are shipping costs going up but securing space on board is increasingly difficult.

Container shortage

“There is a shortage of shipping capacity, there is a shortage of containers, and seafarers have been hit by COVID, which means they are finding it difficult to land vessels and seafarers can’t get home,” Mr van Duyn said.

Port capacity has also been hit by the pandemic.

Many ships have been forced to lay anchor before entering large ports in California, while one of the world’s largest ports in China, Ningbo-Zhoushan, has been closed for the past 10 days.

“That means there is 5 to 10 per cent of the fleet sitting outside borders,” Mr van Duyn said.

Australian Retailers Association chief executive Paul Zahra said the industry group was “deeply concerned” about the supply chain disruptions and temporary closure of Ningbo-Zhoushan.

“Supply chain issues have been an ongoing concern for Australian retailers throughout the pandemic and it’s likely to be compounded by these latest developments, in particular as the busy Christmas shopping season approaches,” Mr Zahra said.

He said a lack of ships, combined with the reduction in passenger flights, would “likely have an impact on retail prices”.

Small firms that “don’t have long-term shipping contracts and have to take whatever price is given on the day will face price rises that will be quite significant,” Ms McGrath said.

Slow boat from China

Retailers have experienced supply shortages on and off since the coronavirus first struck China at the beginning of 2020.

“We’re talking about everything from knick-knacks all the way to apparel,” said consultant Stephen Kulmar of RetailOasis.

Electrical goods have also often been in short supply. Some of the disruptions were compounded by the actions of local retailers when uncertainty reigned supreme.

“Last year when the pandemic first emerged, we had stock appearing late, and then retailers cancelled orders due to uncertainty,” Mr Kulmar said.

Demand for online shopping was subsequently stronger than anticipated and left retailers short on stock.

Christmas shopping warning

As a result of the bottlenecks, some retailers have warned customers to do their Christmas shopping early to ensure they can get what they want.

Others have said there is simply no chance of getting in goods by Christmas if they are not already on shelves.

Mr Kulmar said: “November, December and January are the most important months for retailers, and most retailers I know have organised themselves around that and are well stocked for that period.”