Red Sea shipping crisis sparks concern over foodservice equipment prices

The cost of foodservice equipment imported from the Far East could rocket if the current Red Sea shipping crisis continues, a dealer has warned.

With many freight firms now avoiding the Suez Canal passage due to attacks from Yemeni Houthi rebels, the alternative prolonged journey around Africa's Cape of Good Hope could impact the wider global supply chain in terms of both pricing and lead times.

Some UK foodservice equipment dealers are already feeling the pinch, with Bridgwater-based H2 Catering Equipment concerned that it may have to raise rates for operators.

The firm's director, Dale Howard, told The Caterer: "2024 has only just begun yet our shipping rates have already increased by 500% this month due to the shipping crisis. It's uncertain how long this will last, but we are expecting it to continue for at least a few months.

"I think we may see increases across the board for catering equipment, particularly refrigeration and cooking appliances.

"As a business we are doing our very best to absorb this cost and remain competitive, however it's difficult to see this not affecting the whole industry."

Wider impact

While firms dropshipping Asian equipment brands' products would be the first to be hit with the consequences of a prolonged shipping diversion, in turn affecting foodservice costs, the current status across the sector's supply chain is far from universal.

Steve Hemsil, community development manager at CEDA, the association for catering design, project, and equipment specialists, said its members had not seen "any major knock-on effects" from the crisis, but acknowledged this could change.

"Some manufacturers, our partners, view it as something that will have very little impact as they source the vast majority of parts and components away from countries that are served by the Red Sea route," said Hemsil.

"Any issues they feel could be overcome through flying in components and [they] would more than likely absorb any costs, which would be manageable."

However, Hemsil warned companies bringing in finished products via the Red Sea route could see "a number of issues".

He added: "Firstly, finished stock could be delayed, having a knock-on effect on lead times, and missing due dates that have been agreed with dealers, our members. Also rising costs of transport to bypass the Red Sea or fly products in, which for finished goods can be very expensive, will see the cost of goods increase.

"Based on previous situations, any existing orders will be honoured and if additional costs occur then it will be down to individual suppliers to decide what they do.

"Hopefully we will not see the re-introduction of transport tariffs or logistic charges that we saw during the pandemic and associated transport and availability issues that caused. Suppliers are keen to stress that they will work hard to keep any knock-on effects to a minimum for both dealers and their end users.

"If impacts do bite or the situation worsens then let's hope that the catering industry will draw upon the experiences learned in previous situations that had an impact on supply and accordingly adapt and overcome."

The Caterer spoke to a number of other CEDA members who were not currently concerned about the situation. Jack Sharkey, managing director of Lancashire-headquartered Vision Commercial Kitchens said: "We've not had or heard of any impacts but it's still early days into the New Year."

He said current stock levels were high but, if the crisis continues, shipping rates could rise for foodservice equipment and supplies.

As to whether these costs would be passed on to Vision's end users, Sharkey said it would depend on the products and the contracts in place and suggested a 50:50 mix as to whether kitchen project prices would be affected or not.

Ian Bryant, sales director at Worcestershire-based Sprint Group, said he had not seen any impact of the shipping crisis but the company was monitoring the situation.

"I am aware there has been warning of oil prices rising together with supermarket prices, and [retailer] Next saying there will be a delay getting goods into the shops," said Bryant.

"Obviously as this is a longer route there will be an impact on shipping costs."