Covid bogs down imports
Supply chains on the verge of collapse
JEMIMA BEUKES
· Airfreight costs jump by 32%
· Container import costs increase by over 350%
· Lead times up from one month to six
· Containers booked eight months in advance
· Shipping lines’ surcharge increase haunt consumers
WINDHOEK
Local businesses and import companies have been exposed to major disruptions as the Covid-19 pandemic continues to cripple global supply chains, leaving them vulnerable and on the verge of collapse in light of tripling import costs and extended delays of container deliveries.
This shift calls on factories, retailers and logistics companies to rethink certain business models and best practices to bring about a decent recovery in the short run and safeguard against future pandemics in the long run.
This is according to a Simonis Storm Global Chains analysis, which reported that Covid-19 restrictions and the shortages of truck and forklift drivers in Europe and the United States have trickled down to countries like Namibia that are heavily depended on imports.
The Namibia Engineering Corporation (NEC) reported that containers for its solar projects which usually took six weeks to arrive from Australia now take 18 weeks, while invertor containers that usually arrive within one month from Germany now take up to three months.
They also reported that solar containers which usually took two months to arrive from China now take up to five months, delays which have a serious negative impact on local projects managed by NEC as well as the company’s cashflow.
“Normally, goods were payable 60 days from bill of landing. Cash flows are under pressure from having to pay for goods in full before they arrive. Pre-pandemic, shipping costs of standard 12-metre European containers were quoted at €3 500, which is about N$56 000. Now these stand at between €5 000 and €6 000 - about N$89 150 to N$106 980. This is a 71% increase in Euro terms and 91% increase in Namibian dollar terms. “Whereas Chinese containers increased from US$3 300 (about N$47 550) to US$9 800 (about N$154 150). This is 197% higher in US dollar terms and 224% in Namibian dollar terms,” the report read.
Price quadruples
A local wholesaler and retailer selling bathroom products has been out of stock for a number of months this year as result of delays, and has recorded a spike in import costs. With a standard 12-metre container from China to Walvis Bay costing around US$1 860 (about N$26 802) in January 2020, this price has now more than quadrupled – standing at between US$7 000 and US$8 000, which translates to between about N$110 110 and N$125 840. This marks a more than 370% increase in Namibian dollar terms and 330% in US dollar terms.
A spike in air freight costs has also been observed following a limited availability of container slots and long queues at various ports, which has led many shippers to shift suitable products and packages to air freight options.
As a result, air freight prices between certain airports have increased by 13% on average, with the London to Singapore route recording one of the largest increases, rising 32% since January.
“Colgate, Palmolive and Crocs are some companies who willingly paid higher prices to stock shelves and avoid supply shortages. Air freight prices are expected to remain high by the end of the first quarter in 2022. Although, spreading of the Omicron variant – and potential new variants – and subsequent airport closures and quarantine regulations could pose a risk to global air freight operations going forward,” the report said.
The Simonis Storm report pointed out that while Namibia still ranks very low internationally, the port in Walvis Bay ranks seventh best amongst the 10 SADC members with ports, and Namibia stands a better chance to receive port calls from vessels carrying merchandise goods compared to other SADC members who rank lower.
Stock shortages
Meanwhile, a local automotive company which mainly imports from China recorded delays of a four-week average. With shipments coming in from Europe, they had to book containers eight weeks in advance, compared to two to three weeks in pre-pandemic times.
“However, a bigger problem is availability of stock at overseas suppliers, where some suppliers increased the lead time from one month to between five and six months. Whereas one supplier was used to source a specific part in the past, this company started sourcing stock from up to 10 different suppliers but still struggles to find enough stock.
“Sales in recent months have been stable, but could potentially have been higher in the absence of stock shortages,” the report said.
Simonis and Storm also reported that shipping lines have increased surcharges, which increases overall shipping costs for companies and ultimately leads to higher consumer prices locally - to the tune of 15% on average. This while sales in recent months have been worse than the months following the lockdown in 2020, but overall year to date, have been flat to marginally positive.
[email protected]
· Airfreight costs jump by 32%
· Container import costs increase by over 350%
· Lead times up from one month to six
· Containers booked eight months in advance
· Shipping lines’ surcharge increase haunt consumers
WINDHOEK
Local businesses and import companies have been exposed to major disruptions as the Covid-19 pandemic continues to cripple global supply chains, leaving them vulnerable and on the verge of collapse in light of tripling import costs and extended delays of container deliveries.
This shift calls on factories, retailers and logistics companies to rethink certain business models and best practices to bring about a decent recovery in the short run and safeguard against future pandemics in the long run.
This is according to a Simonis Storm Global Chains analysis, which reported that Covid-19 restrictions and the shortages of truck and forklift drivers in Europe and the United States have trickled down to countries like Namibia that are heavily depended on imports.
The Namibia Engineering Corporation (NEC) reported that containers for its solar projects which usually took six weeks to arrive from Australia now take 18 weeks, while invertor containers that usually arrive within one month from Germany now take up to three months.
They also reported that solar containers which usually took two months to arrive from China now take up to five months, delays which have a serious negative impact on local projects managed by NEC as well as the company’s cashflow.
“Normally, goods were payable 60 days from bill of landing. Cash flows are under pressure from having to pay for goods in full before they arrive. Pre-pandemic, shipping costs of standard 12-metre European containers were quoted at €3 500, which is about N$56 000. Now these stand at between €5 000 and €6 000 - about N$89 150 to N$106 980. This is a 71% increase in Euro terms and 91% increase in Namibian dollar terms. “Whereas Chinese containers increased from US$3 300 (about N$47 550) to US$9 800 (about N$154 150). This is 197% higher in US dollar terms and 224% in Namibian dollar terms,” the report read.
Price quadruples
A local wholesaler and retailer selling bathroom products has been out of stock for a number of months this year as result of delays, and has recorded a spike in import costs. With a standard 12-metre container from China to Walvis Bay costing around US$1 860 (about N$26 802) in January 2020, this price has now more than quadrupled – standing at between US$7 000 and US$8 000, which translates to between about N$110 110 and N$125 840. This marks a more than 370% increase in Namibian dollar terms and 330% in US dollar terms.
A spike in air freight costs has also been observed following a limited availability of container slots and long queues at various ports, which has led many shippers to shift suitable products and packages to air freight options.
As a result, air freight prices between certain airports have increased by 13% on average, with the London to Singapore route recording one of the largest increases, rising 32% since January.
“Colgate, Palmolive and Crocs are some companies who willingly paid higher prices to stock shelves and avoid supply shortages. Air freight prices are expected to remain high by the end of the first quarter in 2022. Although, spreading of the Omicron variant – and potential new variants – and subsequent airport closures and quarantine regulations could pose a risk to global air freight operations going forward,” the report said.
The Simonis Storm report pointed out that while Namibia still ranks very low internationally, the port in Walvis Bay ranks seventh best amongst the 10 SADC members with ports, and Namibia stands a better chance to receive port calls from vessels carrying merchandise goods compared to other SADC members who rank lower.
Stock shortages
Meanwhile, a local automotive company which mainly imports from China recorded delays of a four-week average. With shipments coming in from Europe, they had to book containers eight weeks in advance, compared to two to three weeks in pre-pandemic times.
“However, a bigger problem is availability of stock at overseas suppliers, where some suppliers increased the lead time from one month to between five and six months. Whereas one supplier was used to source a specific part in the past, this company started sourcing stock from up to 10 different suppliers but still struggles to find enough stock.
“Sales in recent months have been stable, but could potentially have been higher in the absence of stock shortages,” the report said.
Simonis and Storm also reported that shipping lines have increased surcharges, which increases overall shipping costs for companies and ultimately leads to higher consumer prices locally - to the tune of 15% on average. This while sales in recent months have been worse than the months following the lockdown in 2020, but overall year to date, have been flat to marginally positive.
[email protected]
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