Businesses and consumers should brace for further supply chain related price hikes, with the cost of shipping continuing to rise. The industry is currently facing a ‘perfect storm’ of conditions, that is pushing up prices.
Just 12 months ago, we were watching freight rates plummet. It’s a different story this year, largely as a result of issues outside of the industry’s control.
Two key factors are the tensions in the Red Sea which is resulting in shipping lines avoiding the area, as well as ongoing industrial action at DP World container terminals across Australia.
Both issues are blowing out wait times and vessel schedules, and these delays unfortunately result in extra costs, which is being factored into the overall price of goods and likely to result in the consumer paying more.
With a resolution for either issue not likely in coming weeks, businesses can expect to pay more for their imports, which is likely to flow through to consumers paying more at the checkout.
We know the cost of doing business is already significant, and unfortunately businesses cannot continue to absorb these price hikes, and so it’s the end consumer who pays.
Much like a standard basket of grocery items has increased significantly in the past 12 months, a standard list of supply chain fees and charges have also risen, including:
- Freight rates: 2023 saw a significant drop in freight rates from the extreme highs of the pandemic years. Prices are rising again as capacity becomes tighter across all trade lanes, and as a result of longer transit times due to tensions in the Red Sea. While freight rates are rising, they’re still lower than peak-pandemic days.
- Terminal access charges: Some ports have increased terminal access charged by up to 50%, as ports look to make infrastructure investments, such as adding or replacing cranes at major terminals.
- Landside charges: Other landside charges – such as trucking costs – have also increased, with some operators adding additional fees as a result of delays caused by ongoing industrial action.
- ETS charges: The European Union’s Emissions Trading Scheme came into effect on January 1, which has resulted in a surcharge being introduced for all shipments to and from the European Economic Area (EEA).
- Detention fees: Shipping lines traditionally only allow 7-10 days for containers to be returned before charging fees, however this can be difficult in an environment of delays and backlogs caused by outside factors. Added to this, detention fees can be charged even if containers are held up by customs and quarantine inspections.
Detention costs are especially frustrating, with the ACCC’s most recent stevedoring monitoring report once again noting cargo owners in Australia currently don’t have adequate protection against unreasonable detention practices.
The ACCC is again calling for reform in relation to detention fees, which is something we’ve also been flagging as a major concern for some time. But how many times does the ACCC have to make that recommendation, before action is taken?
Current issues in the industry again highlight the need for efficiency measures to be introduced across the supply chain, which would help ease some of the current congestion and delays.
It was only late last year that we were warning the underlying issues within the supply chain still haven’t been addressed and when the next disruptive event occurred, we would see the same problems emerge.
Here we are again, and once again, it will be the consumer who pays the ultimate price.
Brian Hack is managing director of freight-forwarding company, EES Shipping.