Leah Farrell

'Perfect storm': Supply chain woes to continue as shoppers told to batten down hatches into 2022

Irish bathroom and furniture businesses have been hit hard by the global transport crisis, a new report highlights.

BUSINESSES ARE ASKING Irish consumers to be flexible and to prepare for supply-related disruption well into 2022 amid concern that the global shipping crisis is unlikely to abate this side of Christmas.

A range of factors — including a shortage of freight containers, booming global consumer demand and congestion at ports across the world — have conspired against global supply chains and heaped transport costs onto Irish companies.

Smyths Toys has already advised Irish Christmas shoppers to buy early this year to avoid disappointment.

Published in recent days, a new report by Woodland Group — a UK supply chain management and consulting company with a major presence in Ireland — has highlighted the challenges Irish importers are facing.

Asia-Europe trade is particularly affected by the disruption.

This week, Soren Skou, chief executive of Danish shipping giant Maersk, told Reuters that the crisis is likely to continue to loom large over global trade into next year.

“There is no quick fix” to the global disruption, Woodland has warned and businesses and consumers can expect delays and shipping rates to remain elevated until at least Chinese New Year in February 2022. 

According to the report, Irish bathroom-ware and furniture companies have seen the cost of shipping goods from Asia jump by at least 25-30% in the past 15 months.

Some business owners say the increases have been even steeper at times.

“I’ve never seen anything like this,” Richard Sloan, managing director of Dublin-based Sonas Bathrooms, told The Journal.

Around 40% of his company’s stock is imported from Asia, Sloan explained.

“Pre-Covid, we would have brought in a 40-foot container from China for somewhere in the region of $1,500 up to $2,000. In the last while, we’ve been paying shipping rates of $18,000,” he said.

Peter Caffrey, owner-operator of Caffrey’s Furniture and Interior Creations in Oldcastle, Co Meath, said he’s also been quoted $18,000 for a container, up from around $2,500 before the pandemic — and that’s just to get in the queue.

“We have stuff out there ready to go but we can’t get an empty container to put the stuff onto,” Caffrey told The Journal. “The stuff is ready in the Chinese factory for us for the last nearly four weeks and we’re in a queue to get a container.”

Domino effect

“It sounds corny but this literally is the perfect storm,” Kevin Brady, managing director at Woodland Group’s Irish arm, told The Journal.

“There’s been many factors but it all started with Covid and effectively then it was just a domino effect.”

An initial shock as the pandemic hit last year was followed shortly thereafter by a boom in shipping demand as consumers embraced online shopping. That momentum snowballed in 2021 thanks to a ‘sugar rush’ of consumer activity as economies reopened and households began to unwind savings built up during lockdown periods.

“There’s just too much demand for vessels,” he said and infrastructure at ports is “creaking” as a result, causing delays.

Heightened demand for shipping has also compounded a global shortage of freight containers, Brady said.

Last year as a result of public health restrictions in China and other major economies, 500,000 shipping containers were stuck in US ports “when they should have been in Asia”, he explains. 

A build-up of containers in ports means longer wait times for ships looking to dock. Longer waits for berths mean disrupted shipping schedules, causing a ripple effect of delays across the world.

At one point last week, a record 56 ships were queuing to enter the port of Long Beach in California, one of America’s major transport hubs.

European ports have had similar issues, which has been particularly troublesome from an Irish perspective, Brady said.

Rotterdam and Antwerp, which are the main feeder ports for Ireland are clogged. So it doesn’t matter if you’re importing goods through those ports or exporting via them — there’s huge congestion.

“It’s really not just one thing — it’s been one thing after another.”

Extra costs

Some businesses have been able to deal with the delays and absorb the extra costs associated with transporting goods.

But Peter Caffrey said the crisis is definitely having an impact on his day-to-day operations.

“Transport has a big effect on your cash flow now because a container that would have cost $3,000 15 months ago now costs $18,000 — that’s an extra $15,000 outlay on your transportation costs,” he said.

There are rising concerns that these extra costs are starting to hit consumers and add to inflation.

This week, Governor of the Central Bank of Ireland Gabriel Makhlouf said supply bottlenecks illustrate that “the economic experience of the pandemic and the road beyond is not uniform across all sectors”.

Many economists and policymakers — including Makhlouf and European Central Bank President Christine Lagarde — expect these inflationary pressures to lift over the coming months.

But “considerable uncertainty remains”, Makhlouf warned.

Overall, Caffrey is relatively positive about the outlook – shipping prices can’t go much higher, he said. Last week, for example, French shipping giant CMA CGM said it will freeze spot freight rates for a period of six months until the crisis begins to abate.

Richard Sloan, meanwhile, also said he can see the bright side.

“I’m very mindful of having too negative a spin on this narrative,” he said, because “demand has remained very strong”.

He added, “As a business, we have coped well, we’ve adapted very well and we’ve got a diversified global supply chain.”

Whereas some of his competitors are more reliant on China, Sloan said Sonas has “been able to kind of absorb some of those increases by spreading the cost across our foreign product portfolio. 

Brady said this kind of diversification is becoming a major trend in Ireland. 

Given the disruption to shipping and Covid-related port closures — which have continued into the third quarter of 2021 with a shutdown in Ningbo — many importers are looking for new suppliers.

“We’re seeing a lot of our clients talk about different alternatives — Europe, Turkey, Eastern Europe,” he said.

Now that’s never going to be able to replace China, really, just because of the sheer volume of goods that come from there. But people who were single-sourcing from China have looked — and if they haven’t, they definitely should look — at that strategy because we don’t know how long this is going to last.

How long could it last, in theory?

“That’s the six million dollar question,” Brady said.

Woodland is “very confident” that high rates, delays and disruption will be a feature “through to Chinese New Year, which is in February”, he said.

In reality, it could be the second quarter of the year before things begin to even out.

In the meantime, Irish shoppers are being asked to be patient and flexible, given the difficulties.

“Start your Christmas shopping now,” Brady said.

Consumers need to “be flexible in their product requirements” Sloan added.

“What I mean by that is we have multiple product categories but we’ve got lots of variants of the same product,” he explained.

“You might want Product A but we may not have that for you on time for when you need it. But we will be there to offer you Product B, which will be a very close alternative.” 

Your Voice
Readers Comments
This is YOUR comments community. Stay civil, stay constructive, stay on topic. Please familiarise yourself with our comments policy here before taking part.
Leave a Comment
    Submit a report
    Please help us understand how this comment violates our community guidelines.
    Thank you for the feedback
    Your feedback has been sent to our team for review.

    Leave a commentcancel