CE and appliance retailers are facing new concerns with several consumer electronics factories in China closed down. Compounding this a massive shortage of pallets which is delaying the shipping of goods to retailers in Australia.
Last night several CE and appliance Company stocks fell with analysts concerned that stock bound for stores over the holiday period won’t arrive in time.
Black Friday has been a spectacular success for CE and appliance retailers with organisations such as Laser Corporation, Tempo, Blueant reporting record sales.
“We are already getting calls for fresh stock for the holiday period” said one distributor.
The real concerns are COVID factory lockdowns, pallet shortages and demonstrations that broke out in mainland China over the weekend as people vented their frustrations with Beijing’s zero-Covid policy.
Shares of companies with big production facilities in China were under pressure. Apple dropped 2.6% after Bloomberg reported that unrest at a factory in China could mean 6 million fewer iPhone Pro units for the year.
“When you look at Apple not being able to fulfill the orders for their iPhone because the factories in China are shut down, I think that’s a perfect example of how something in one country can affect somewhere else,” said Victoria Fernandez, chief market strategist at Crossmark Global Investments. “It just has a ripple effect through the global economy when you have something as large as the Chinese economy shutting down.”
In Australia Apple will not have stock of their new iPhone 14 until January at the earliest according to retailers.
Then there is the issue of pallets with several local distributors telling ChannelNews that shipments have already been delayed due to a global shortage of pallets.
Pallets are instrumental in transporting bulk goods and utilised by businesses globally. However, a number of factors have led to a shortage of pallets available within Australia, and this is consequently placing pressure on supply chains claim shipping Companies.
The three core reasons for pallet shortages are timber shortages due to high demand due to an increased number of home renovations during COVID.
Timber is used to build new pallets and repair existing pallets.
The shortage of timber has resulted in few new pallets being made, and existing pallets not being repaired.
Within Victoria and New South Wales, parts of the manufacturing sector were closed during the COVID-19 restrictions for 2020 and 2021. This created challenges for new pallets to be made, even before there was a shortage of timber.
In conjunction with this, COVID-19 restrictions have forced businesses to close, so freight destined to a closed business can sometimes be held on pallets until the business reopens, and therefore is unable to be used.
Existing pallets were stuck in warehouses, and there was not enough wood to build new pallets.
Then there is the issue of hoarding with businesses that are aware of the pallet shortages holding onto pallets or moving them within their own supply chain to maintain supply, rather than returning pallets back to the Brambles owned CHEP or Loscam for redistribution.
Yesterday Brambles merged its CHEP China pallets business with rival Loscam in a US$132 million ($197 million deal) and will become a small shareholder in the bigger entity in a fiercely competitive China market where scale is key.
Brambles will emerge with a 20 per cent stake in the enlarged entity, with Loscam China holding the other 80 per cent of the group, which will have a stable of 20 million pallets.
The number of pallets returning to Loscam depots dropped 50% in September 2021. This poses a safety risk, as CHEP and Loscam are responsible for inspecting and maintaining the quality and integrity of pallets. When pallets aren’t being returned to CHEP and Loscam depots, they cannot be inspected to ensure they are safe to use.
