An early warning
By Richard Gyde, managing director, Mila.
Post COVID and post Ukraine invasion, the global hardware sector had just been getting used to a period of relative stability when it comes to logistics and freight costs.
However, that stability seems to be coming under increasing threat from the spate of attacks by Houthi rebels on ships in the Red Sea making their way to and from the vital Suez Canal transport link; and I think the market needs to be alert to some potential warning signs ahead.
At the time of writing, a total of 23 commercial ships have been targeted since mid-November – triggered in part by the current crisis happening in the Middle East – and we’re seeing a growing number of freight companies deciding to switch to safer, but significantly longer, alternative routes as a result.
We’re assured that there’s now a US led international naval force in place to defend the Red Sea, but there’s no sign yet of confidence returning to the sector; and the vast majority of ships are now making the journey from Asia to Europe via the Cape of Good Hope. That’s another 3,500+ nautical miles and another 10-15 days at sea.
If the current situation continues for much longer, the vast majority of UK importers are likely to be looking at delivery delays and rising transport costs – because it doesn’t just take longer for containers to arrive here, but also longer for them to be shipped back empty ready for their next cargo.
At the moment, shipping container costs are nowhere near the record levels we saw in the pandemic, but we’re already being quoted prices which are up 175% compared to last year, and we are hearing talk of the dreaded freight surcharges once again.
Some of the big retailers, including Next, have started warning consumers that some items might be delayed over the coming months, and, as a responsible supplier, it’s only right for us to do the same in this market as well, so that we manage the expectations of trade customers.
My understanding from the Mila supply chain team is that carriers are in a much better position than they were during the pandemic to make operational adjustments because there’s now a degree of overcapacity in global shipping, but we are keeping a very close eye on developments, and Mila will be updating customers directly as soon as we have more news.