One of the most-talked-about issues during the Hong Kong Toys & Games Fair last month was the challenges shippers are facing moving into 2024. Just when many thought we were getting back to “normal,” that’s anything but the case.
Disruptions in the Red Sea have sent container costs skyrocketing since December–in some cases nearly doubling. Insurance premiums are rising significantly, and then there’s increased time to ports if shippers need to find new trade routes. Even ten days’ delay can have a huge impact when the industry has moved to more just-in-time delivery. All of this can create instability in the shipping sector, which, in turn will have an impact on toys. Even if the goods get on the water, there is also the potential for backlogs in ports, ships being in the wrong places at the wrong time, and all the other issues that challenged deliveries just a couple of years ago.
Indeed, many of the people I spoke to Hong Kong were saying that added shipping time will have a ripple effect throughout the entire production timeline, meaning delays in getting goods on shelves, which–as we saw in the pandemic–leads to cancelled orders or too much inventory overhang from season to season. All of this is forcing some toy companies to look at their palns for the year.
While the Red Sea routes mostly serve the Middle East and Europe, geopolitical challenges around the globe could result in other routes being affected. It’s early days to consider this, but many are concerned. Since more than 80 percent of goods manufactured overseas reach the U.S. by water, there’s reason to be concerned.
Just this week Maersk, the second largest shipping company in the world, which currently serves slightly over 14 percent of the global container market, reported a 17 percent decline in its stock price, suspended a stock buyback plan, and issued a cautious outlook for 2024.
All of this is likely to become a political football in an election year. Plus, the number of non-state actors may increase. The success of the Houthi rebels in disrupting shipping as a political statement may, encourage others to try these tactics in a volatile and chaotic environment.
Have you changed plans this year because of shipping challenges? What do you think is ahead?
