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ACCC Investigating 300%+ Rise In Container Costs

The Australian Federal Government via the Australian Competition & Consumer Commission has finally moved investigate why 40-foot shipping container prices have risen by over 300% in one year with retailers and distributors wearing the brunt of the price rises, it’s also creating inflationary pressures in the Australian economy claim financial observers.

Shipping lines operating into Australia, have been accused of deliberately jacking up prices with distributors telling ChannelNews that the price rises will lead to “significant price rises” in the last quarter and bigger rises in 2022 if allowed to continue with air freight suddenly looking attractive for suppliers who in switching transport options are now having to bid to get freight onto aircraft.

At this stage “It is not a cartel activity (investigation); it is anti-competitive behaviour. It is not necessarily massively advanced, but it is something we are looking at.” claims ACCC Chairman Rod Sim

In these early stages the ACCC has a particular focus on the price and movement of containers.

“We have an investigation under way on this,” Mr Sims said.

“There is a limited amount I can say on it, but we are looking at the freight system – particularly the role that containers play, I can certainly say that, and that is certainly on the list of investigations. We are aware of what’s going on with containers, and we are investigating it” he told the Australian.

403123 06: Gigantic cranes at Hanjin Shipping load 30-ton shipping containers onto the Hanjin Oslo freighter in the Port of Los Angeles March 29 in Los Angeles, CA. Current cranes, averaging 100 feet tall with 137 foot long booms, will soon be upgraded to 240 feet tall with 210 foot long booms. By the end of the year, the nation’s busiest port will become “super-sized” with ever more massive cranes, freighters, and tug boats to meet the insatiable American appetite for cheap imported goods. (Photo by David McNew/Getty Images)

Drewry’s composite World Container index, a leading barometer of international shipping charges, recorded the cost of a 40-foot shipping container at $US10,083 ($13,709) for September 9, up 309 per cent from the same week in 2020.

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

Several distributors have questioned whether the ACCC has the power or authority to push changes as container shipping falls under Maritime laws and prices are set outside of Australia by shipping lines who are then passing on the price rises to consumer electronics, appliance and other manufacturers of goods being shipped into Australia.

The shortage of containers has been blamed on supply chain disruptions caused by Covid-19 and recent Covid-19 outbreaks at key Chinese ports some that have been closed down are currently reopening.

However, many local chief executives privately believe that the container shortage is partly artificial – manufactured by container owners and shipping lines to squeeze them with higher prices.

The Australian claimed that Sims would not be drawn on whether his investigation was triggered by complaints from retailers, who have spoken out in recent weeks, but he confirmed he had heard complaints since the start of Covid-19 about the impact of steeper shipping and container costs.

“I wouldn’t associate it with a particular accusation … but certainly we are aware of many complaints about containers, and we are investigating that,” he said.

“It is a recent issue. We are certainly aware of the massive increase in shipping prices, but the container issue in particular.

“We do a stevedoring report once a year and that tries to look beyond stevedoring and look at the freight system.

“We will certainly look at shipping costs in the context of that, but separately we have an investigation into this container issue in broad terms.”

Australian Retailers Association chief executive Paul Zahra said “Shipping costs have quadrupled in the last year during the course of the pandemic. Most Australian retailers who are doing their best not to pass these costs on to consumers in the short term are seeing their margins heavily squeezed.

Suppliers claim differently telling ChannelNews that retailers in the consumer electronics and appliance markets are pushing brands and distributors to wear the cost of price increases.

“You only have to look at the latest financial results at Harvey Norman to see how much this retailer is benefiting from COVID, there is little if any impact for them from price rises”.

“This is happening at a time when most retailers have already been decimated by the lockdowns and additional Covid-safe cost imposts. This is clearly not sustainable, and something needs to change.” Zara added.

The chief executive of twin discount department stores Kmart and Target, Ian Bailey, said the retailer had been forced to access the spot container market to deal with rising customer demand which was feeding into higher shipping and freight costs. Kmart, part of Wesfarmers, is the largest importer of shipping containers in Australia.

Mr Bailey said he believed it wouldn’t be acceptable to pass on higher shipping costs to shoppers.

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