Retailers welcome probe into freight
AUSTRALIA’S top retailers have welcomed the competition regulator’s investigation into the five-fold jump in shipping and container costs in the wake of the Covid-19 pandemic.
Many believe the hike was not a “natural phenomenon” and hoped the investigation by the Australian Competition and Consumer Commission would shed light on the apparent shortage of containers and the price of shipping, which has emerged as a major cost pressure for the nation’s $320bn retail sector.
“We welcome the ACCC’S move on this one because it is a very costly expense line and everybody in the country is feeling it and undoubtedly it ends up being rolled out to the customer,” said Mosaic Brands chief executive Scott Evans.
“Eventually retailers can’t always carry the cost, or some retailers won’t be able to carry the cost, so everything just naturally inflates.
“I definitely believe it is not a natural phenomenon that’s for sure. From car parts to clothing to farming equipment to everything that gets delivered into this country, will be four times more expensive. And somebody along the line is going to pay for that.”
Anthony Scali, the CEO of furniture chain Nick Scali, also welcomed the intervention of the ACCC.
“The problem is, there are two ways to buy freight, either you deal through a freight forwarder or you deal directly with shipping lines. We always deal with big forwarders and every time you dealt with shipping lines the price was higher than what I could get with a forwarder.
“We know the shipping lines are not always providing the shipping containers when they should, unless you pay a premium price,” Mr Scali said.
“I have had agreements in place (with freight forwarders) that have just been ripped up, because they can’t get the container, the shipping line won’t give it to them.”
It was reported on Monday that ACCC chairman Rod Sims had confirmed the regulator was investigating the freight sector after a massive increase in pricing
that was blamed on disruptions to global supply lines caused by Covid.
Wesfarmers CEO Rob Scott also recognised the explosive growth in shipping prices, which has ratcheted up costs and caused delays.
“The pandemic has caused significant disruption in global container shipping markets and we have seen this translate to higher costs as well as delays. We have made changes to our ordering processes to adapt to these disruptions and we are continuing to work with our suppliers.”
The latest level for the Drewry’s composite World Container index, a barometer of international shipping charges, recorded the cost of a 40 foot shipping container at $US10,083.84 for September 9, up 309 per cent on the same week in 2020.
But Jim Wilson, a spokes
man for peak industry body Shipping Australia, said the surge in prices was driven by supply and demand and not any anti-competitive or cartel behaviour.
“As far as we are aware there is no collusion, nor price gouging, no price hiking, nothing untoward or of a sinister nature, it is just normal operations of the market that can be explained by basic economics.
“A combination of a surge in demand for cargo and extreme port congestion (which takes out huge volumes of the supply of shipping services) have caused demand to massively outstrip supply.”
There were also supply constraints, Mr Wilson said.
“Unfortunately, poor container port performance and port congestion is eating away at shipping supply and shipping capacity. … Ports need to up their game.”