The Tribune

By NEIL HARTNELL

and YOURI KEMP

Tribune Business Reporters

Bahamian businesses sourcing product from China saw shipping container rates double in recent months with raw material price rises of up to 50 percent set to inflict a further squeeze for some.

Jason Watson, Automotive Industrial Distributors (AID) president, told Tribune Business yesterday that while freight pressures had started to ease he was now bracing for a spike in commodity prices such as steel that will impact the cost of tyres and other products he stocks.

While he had largely managed to absorb the shipping cost increases, which stemmed from a shortage of containers caused by the COVID-19 induced backlog in global supply chains, he added that AID may have to pass the impact of the raw materials spike on to Bahamian consumers depending on how long it is sustained.

“I got six containers of tyres shipped recently,” he revealed. “I’d have paid $7,500 per container previously, but had to pay $12,000 for those - a $4,500 increase. That situation is easing now. We’ve landed containers since then and the rates have gone down significantly.

“It was really based on a backlog of containers. We paid a premium just to guarantee those containers. That was about three-and-a-half weeks ago and the rates have come down significantly since then to a little less than $10,000. I would say by May to June that will return to normal. It’s a situation that was kind of temporary.”

Another Bahamian retail source, speaking on condition of anonymity, said the container shortage and supply chain backlog was affecting the entire world and not just The Bahamas. “Everything got shut down so the freight got stacked at the ports,” they said. “There’s a backlog in shipping, and they’re trying to solve it, but if you want timely delivery of goods from China the rate has increased.”

Mr Watson, meanwhile, said he was now monitoring projected price hikes of up to 50 percent in raw materials prices that will impact him directly by increasing tyre costs. “We will start to see more of that in the coming months,” he added. “Everybody’s starting to be affected by that now. The raw material price increases are starting to take hold.

“We’re going to have to look out for that in the next couple of months, and in the next couple of months I hear US suppliers are increasing their prices by 10-15 percent, but the raw material price for tyres from China will take a big hike.”

Mr Watson said whether that results in price increases for Bahamian consumers will depend on how like the raw material cost rises are sustained. He added that AID would be able to absorb most of it for three to four months, but anything that was “indefinite or for a long period of time we’ll have to pass on”.

Andrew Wilson, QBC’s (Quality Business Centre) principal, told Tribune Business he had seen similar trends to Mr Watson. “The freight cost from China has probably doubled,” he said, adding that this had taken effect from the New Year.

“There’s a big backlog in trade. We’ve seen the cost of shipping containers rise from an average of $6,000-$7,000 per container to $11,000-$13,000 per container. That’s the last price I paid for a couple of containers from China seven to eight weeks ago.”

However, Mr Wilson said his ability to source product direct from China and bypass US middlemen meant he had been able to offset the rise in freight costs, and “at the end of the day we’re still in a better position in terms of cost than we would have been buying those products out of the US.

“I understand it’s going to be like this for a while because of the disruption of supply chains with COVID-19. A lot of shipping built up in Japan and China,” Mr Wilson said.

Christopher Lleida, Premier Importers chief executive, told Tribune Business that containers being left in the US and not returning to China has created shipping delays for building materials. 

He said: “I know that there are some issues in the US, but that has to do with containers as much as anything else. From what I understand, the ocean rate between the US and China has tripled.

“So where traditionally cargo would have been offloaded and then US exports would have been loaded on to head back to China, the cargo companies are finding they are making more money just discharging in the ports and then returning empty to take on another load.” 

This practice is leaving containers in the US empty, and shipping companies in China with no containers to ship goods to the rest of the world. Mr Lleida added: “The trans-Pacific and trans-Atlantic type cargo vessels have these massive amounts of containers. They used to get $2,000 per containers, now they’re getting somewhere between $6,000 and $7,000 per container. 

“So, they’re able to offload their cargo and then head back empty, reload and return. This is more profitable for them to do that.” 

Mark Roberts, principal of FYP Builders Mall, said that while he does not buy goods directly from China, he has noticed challenges with shipping and freight from Asia and the impact it is having on US suppliers. 

Mr Roberts said: “We’ve noticed with our US suppliers that there has been some price increases and some delays, just a little slower than usual. They have been telling me there is a shortage of containers. There has been some supply chain issues with getting trucking companies.”

“A lot of cargo clears in Los Angeles and they’re claiming that they’re having difficulty getting it across to the east coast on rail and by truck.” 

Mr Roberts expects the current high prices for building materials to “remain”, adding: “In this case, I think they are going to stay up. The population doesn’t stop, we all need more houses, we all make babies. That’s the way it’s going to go.”