Contractors hit by ripples of shipping ‘super-inflation’

UK contractors are suffering from the knock-on effect of a shortage in global shipping capacity.

Shipping costs from Asia to the UK soared 500 per cent between June 2020 and June 2021, according to Philip Damas, head of supply chain advisers at maritime consultants Drewry. “We are starting to see super-inflation in transport costs feeding into inflation in construction and other goods,” said Damas.

Civil Engineering Contractors Association (CECA) director for the North East Stuart Miller said that members of the organisation are experiencing the “knock-on effects” of the rise in shipping prices.

“Price rises and shortages of materials is now a business-critical issue which puts at risk the recovery of the whole construction sector,” he said. “The knock-on effects could lead to delays in project programmes but the price rises could have a harmful effect on any contractor who is locked into any fixed-price agreement, particularly for a long time period,”

In early 2020, there were massive delays at trading ports caused by the pandemic’s impact on imports, factory closures, the introduction of COVID-19 safety measures, and the after-effects of Brexit.

It was reported that unloading time quadrupled from one week to four weeks. A shortage in the supply of shipping containers  has also contributed to industry’s materials shortage. Imported items such as timber, steel and electrical items are particularly affected by shipping costs and availability.

ING senior economist for international trade Joanna Konings said congestion in the shipping system, a scramble for container capacity to service new orders and rebuild inventories, and poor port performance with most ships missing scheduled arrival times were pushing up prices.

“There simply isn’t the slack in the system to catch things up,” she added.

Damas said a return to normal operations is not yet on the horizon.

“It is possible that the current crisis will even last until a large number of ships currently under construction join the shipping market in 2023,” he said. “It will take many months for the shipping and port sectors to address the current inefficiencies, congestion and delays and to deploy additional infrastructure capacity.”

Along with international delivery problems suppliers are struggling to transport materials within the UK due to a shortage in HGV drivers.