Retailers worldwide are stocking up on goods before the Chinese Lunar New Year holiday and have also been seeking air/rail alternatives to transportation via the Red Sea to avoid having blank shelves in spring, experts and executives informed Reuters. A European retailer explained that it was postponing marketing campaigns for specific goods until the stocks were secured.
Major container vessel operators like Hapag-Lloyd and Maersk are re-routing vessels away from the Suez Canal — the shortest channel to Europe from Asia — following militant attacks on ships in the Red Sea. The diversions have also resulted in fears of a prolonged disruption to global trade as supply chains begin to unsnarl following the COVID-19 pandemic. The route around southern Africa adds $1 million in fuel costs and nearly ten days to the journey.
Interviews with about five retailers selling all kinds of goods, from furniture to mechanical parts, and with analysts show the unexpected measures the firms are taking to cope. BDI Furniture (US) is front-loading orders and depending more on the factories in Vietnam and Turkey. It has also been requesting the freight brokers bypass the Suez and Panama canals and vessel goods across the Pacific to California, where they can be transferred by rail to the East Coast US warehouse.
Hanna Hajjar, the VP of operations at BDI Furniture, stated that it has low stocks of some media cabinets and office and bedroom furniture on vessels. He stated that the recent delays were unforeseen, adding that these disruptions have lengthened the transit times from Vietnam by 10 to 15 days.
Firms that transport goods to Europe from China and the US are considering alternatives like rail and air, but higher prices mean they will have to be strategic about the products they must prioritize. Hajjar says BDI is using the California route as a solution on a case-by-case basis as the rates are double the average shipping cost via the Panama or Suez. Although Asia-to-Europe trade is the most exposed to Suez disruptions, as much as 30% of shipments to the US East Coast pass via the canal.
Source: Reuters