It’s Beginning To Look A Lot Like Christmas

Posted on Jun 03, 2024. by NTI

As the NTI newsroom have reported on a couple of occasions, the effect of attacks on shipping by Houthi rebels in the Red Sea and the Gulf of Aden is continuing to be felt by European businesses.  Now, businesses are taking early preventative measures to avoid Christmas being cancelled.

The Houthi rebels have already launched attacks on more than 50 ships in their support of Hamas.  The attacks on ships have forced owners of vessels travelling between Asia and Europe to take a longer route around Africa, and so ships are starting their journeys earlier to allow for the extra time needed for the diversion.

"The effects of the diversions from the Red Sea that started last December are only now becoming apparent, with vessels on the Asia-Europe trade needing more than 100 days on a rotation by circumventing Africa," said Dominique Nadelhofer, from Kuehne + Nagel, a major sea logistics firm.  He added that the rotation of container equipment has also been disrupted, and said only around 50% of global container shipping is currently completed on time.

Furthermore, container prices, which peaked in January and briefly declined, have rebounded sharply in recent weeks.  The average cost of shipping a 40ft container now exceeds $4,000, a 140% increase from 2023, according to freight market tracker Xeneta.

Peter Sand, Xeneta's chief analyst, said that importers have learned many lessons from Covid and ships crashing in the Suez canal including that "the most straightforward way to protect supply chains is to ship as many of your goods as you can as quickly as possible.  That is what we are seeing with some businesses telling us they are already shipping cargo for the Christmas period - in May," he said.  By way of reference, typically retailers start importing goods for Black Friday sales and Christmas shopping season between late summer and autumn.

Nick Glynn, boss of the Buy It Direct group, owns several online retailers including Appliances Direct and Laptops Direct, which are having to plan and book well in advance to make sure their shipments arrive on time.  However, this is having knock-on issues as Glynn indicated - "It impacts cash and warehouse space as suddenly you have to store the goods for longer. You can't risk ordering later."

He added there was "no way" most online retailers could absorb those price increases on big-ticket items, he said. "So unfortunately for consumers, the next few months will see significant rises on these big-ticket items.”

In a final piece of worrying news, analysts have predicted that the switch in route round Africa and on global resources to the Red Sea may give rise to increased attacks by Somali pirates.

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