Erratic global weather has been blamed for rising food prices but there’s a new threat on the horizon, as freight shipping charges look set to rocket.
Maersk Line - the world’s largest container shipping company with a 15% market share - has announced a 30% price increase to its reefer freight charges. This equates to a global price increase of $1,500 (£932.78) per 40 ft equivalent container across all of Maersk’s shipping routes.
Maersk blamed the increase on rising bunker (fuel) prices and claimed it needed to raise freight charges to allow it to invest for the future. “If nobody invests, consumers will not be able to continue their current diet based on global trade,” warned global head of reefers Thomas Eskesen.
Maersk accounts for around 25% of the global market for reefer ships, which are designed specifically for perishable goods. But its reefer rates had not matched the rate of inflation over the past seven years, Maersk said, and had also failed to cover rising fuel costs in the past 18 months.
The company is currently negotiating with individual customers but if Maersk achieves its 30% planned increases, consumers could be left to pick up the bill after the new charges kick in on 1 January next year.
Eskesen insisted transport costs only represented a small portion of the retail price. However, he conceded that “some commodities may see increases, but this happens on a daily basis as supply and demand changes.”
Asda’s direct sourcing arm IPL is a major customer of Maersk. Although Asda would not be drawn on whether Maersk’s proposed increases would translate into higher on-shelf retail prices, it confirmed it was in negotiations with the shipper.
“Our number one priority is to deliver the freshest produce at the lowest prices for our customers,” a spokeswoman for the supermarket chain said.
The Grocer was awaiting confirmation from Maersk’s major competitors over whether they intended to follow Maersk’s lead in putting charges up as it went to press. However, industry sources were concerned that as Maersk was the biggest container shipper, its actions could set a precedent. “If all shipping lines apply the same cost, what will that do?” said Nigel Jenney, chief executive officer for the Fresh Produce Consortium.
The FPC has already approached Maersk for a meeting to garner more information and assess the potential impact on its importer members.
From reefer to retail
Reefers are specifically designed to transport perishable goods such as meat, fish, fruit and veg. Much of the lamb transported into Europe from New Zealand is shipped using Maersk Line. One lamb industry source predicted any freight charge increases would have little effect on the price of lamb at retail but would have to be absorbed into importers’ “already thin margins”.
One fresh produce importer estimated that the increases could add around £46.62 to a pallet of goods. Although the importer predicted this was not likely to send the cost of food soaring, “you might start seeing slightly less promotion,” a source said. “The value side of things might get hit,” he added.