Container costs back on the agenda of flooring challenges
June 10, 2024
Container costs are back in the headlines for flooring importers with the vinyl sector espeically under pressure as a tight consumer market combines with rising freight charges to hit margins.
LVT suppliers have been discounting retail prices in ther lack-lustre first half of 2024 to stimulate sales but several have told us that this strategy has been impacted by freight costs that has seen the spot rate for shipping a 40ft container jump from $3,000s to as much as $5,000.
As a result, sales margins have evaporated in some of the sector and inventory building for the hoped-for recovery in the Q3/4 sales season is looking expensive.
The container costs have been impacted primarily by the ongoing crisis in the Red Sea since Houthi rebels in Yemen started attacking shipping before Christmas. Port congestion in key hubs in Western Europe has exacscerbated the problem.
Not eveyone is losing out however. Maersk, a global leader in container shipping announced last week that profits could rise to $9 billion for 2024 due to the crisis but in better news for importers, it has also warned shareholders that a wave of new container vessels entering the market this year and next will cause overcapacity and hurt profit. Analysts at Bernstein expect a 15% fleet expansion across 2024 and 2025, outstripping demand.
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