Retailers say shipping cost hike will drive prices up as ACCC launches probe

Retailers have welcomed the competition regulator’s investigation into the five-fold jump in shipping and container costs, which is set to drive prices higher.

The ACCC is investigating the freight sector after a massive increase in pricing that was blamed on disruptions to global supply lines caused by Covid. Picture: AFP

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, which is set to drive storefront prices higher.

Many believe the hike in container prices 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 that 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.”

Nick Scali CEO Anthony Scali has welcomed the ACCC investigation into rising shipping and container prices. Picture: Chris Pavlich

Anthony Scali, the CEO of furniture chain Nick Scali, also welcomed the intervention of the ACCC by kickstarting an investigation into freight prices, and in particular the price of shipping containers.

“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 to the container, the shipping line won’t give it to them.”

Mr Scali, who warned last month that the rocketing price of shipping would force him to ratchet up his prices to customers, welcomed the ACCC investigation.

“I do, yes, I think someone has to look at it.

“Everyone (retailers) is raising prices already, in furniture lounges are a big volume user so there have been cases where the freight costs are more than the price of the lounge, that’s crazy, at the cheaper end, and you have to pass prices on,” he said.

The Australian 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.

“We have an investigation underway on this, there is a limited amount I can say on it, but we are looking at the freight system particularly the role that containers play,” Mr Sims said.

“We are aware of what’s going on with containers, and we are investigating it.”

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,” Mr Scott said.

JB Hi-Fi chief executive Terry Smart.

JB Hi-Fi chief executive Terry Smart said the consumer electronics retailer was a third party as it wasn’t a direct importer, but was facing a shortage of containers.

“Along with potential price rises that the importers may pass on, our concern is capacity. While stocks are being impacted for many reasons such as elevated worldwide demand, chip shortages, factory shutdowns, etc, we are getting feedback that available capacity is a significant issue and is a potential risk to inventory this side of Christmas,” he said.

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. The 1 per cent gain for the week was the 21st consecutive week of increases.

But Jim Wilson, a spokesman for peak industry body Shipping Australia, said the surge in prices was driven by the forces of supply and demand and not any anti-competitive or cartel behaviour by shipping and container owners.

“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.

“There are about 40 container ships stuck off the coast of the Port of Los Angeles. There are long queues at ports in China. There are days and days of delay in Vietnam and Auckland, and all over the world. Ports need to up their game.”

But he too welcomed the ACCC’s investigation.

“As far as I am aware all the shipping companies make their decisions individually by themselves, pricing is set individually and we have a free operating system here. I understand the ACCC may be investigating and as far as I am aware there is nothing to investigate.

“The ACCC may be acting on consumer concerns, and that is completely understandable, but as far as Shipping Australia is aware there is nothing to see.”