Stranded containers, jammed ports presage price rises in Israel

Containers at Haifa Port  credit: Paul Orliev

According to Dun & Bradstreet, imports of clothing and electrical goods are especially vulnerable to supply chain disruption.

Bicycles, exercise bikes, garden pools, weights and yoga mats - just some of the products of which the stocks in Israel ran out during the coronavirus lockdowns, leading to continuing shortages. At least some of these products imported into Israel and elsewhere in containers have simply become stuck on their way. The jam is partly due to global factors, but it partly has local causes, and at present it is not clear when it will clear, and how much it will cost us.

The coronavirus pandemic led to a rise in online purchases, and at the same time damaged global supply chains because of a lack of containers for shipping goods by sea from China to Western countries, Israel among them. Along with a rise in prices of commodities such as oil, corn and soy has come a sharp rise in shipping costs for Israeli importers, which is liable to be passed on to consumers.

China's economy recovered last year faster than any other major economy, amid high demand for Chinese products such as electronic equipment and medical equipment during the lockdowns. At the same time, ports in the US and Europe were having to cope with manpower restrictions and shortages.

The disruption at the ports meant that empty containers stayed around at port gates for weeks, causing a shortage of containers for goods consignments from China, which in turn caused longer shipping times and delays in goods reaching their destinations.

This has led to a sharp rise in recent months in shipping costs from China. Dun & Bradstreet found that the price for shipping a 40 foot container from China to Europe and the Mediterranean basin was $2,000-3,000 in 2020. At present, because of the global shortage of containers, the price is around $9,000. In February, a peak was reached of $11,000. Bulk cargo has also become more expensive to transport, with prices up 20-30%.

Dun & Bradstreet sees the supply chain disruption harming Israel's logistics industry this year. The solutions available to importers are reliance on surplus stock, reducing import volumes, and deferring orders until the situation clears up. Dun & Bradstreet forecasts that this will happen only in several months' time, well into the second half of the year.

Another possibility is more imports from places other than China - chiefly Turkey and Europe. This has begun to happen, bringing in train a rise in shipping costs from these places as well, although less than the rise in the cost of shipping from China. Or importers can continue importing from China, passing on the rise in shipping costs to consumers insofar as market conditions and local competition in the industry concerned allow it.

So far, goods shortages have hardly been felt in Israel, mainly thanks to surplus stocks from before the period of the lockdowns. There has been no substantial rise in prices in Israel yet, but there have been rises in some items, such as Canola oil, and rises in dairy product prices can be expected.

To the global difficulties are added specific problems at Israel's ports. The trade association Importers of Agricultural Produce for Israel wrote to Prime Minister Benjamin Netanyahu calling on him to intervene to solve the problem of the backlog of ships at the ports. "Ships wait for weeks to enter the port, and even when they do, unloading is slow, not continuous, and plagued by breakdowns." The letter states that importers have to pay penalties to the foreign shipping companies, and concludes by warning that "all these heavy expenses in the end come to rest on the shoulders of the Israeli consumer."

Textiles and electrical goods

"Among the sectors that are candidates for price rises is electrical goods, which mainly relies on imports from China and the East. The rises could be as much as 10-15%," Dun & Bradstreet writes. Another sector in which Dun & Bradstreet estimates prices are liable to rise, although by a smaller percentage, is textiles.

According to Central Bureau of Statistic figures, China is the source of about 15% of imports into Israel (excluding diamonds), but in some sectors such exports are much more significant. Dun & Bradstreet estimates that China accounts for 35-40% of the clothing sold in Israel. Supplies of machines and electronic equipment and of computer equipment are also heavily dependent on China.

Published by Globes, Israel business news - en.globes.co.il - on April 13, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Containers at Haifa Port  credit: Paul Orliev
Containers at Haifa Port credit: Paul Orliev
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