A container ship from Japan is anchored at the container dock of Shanghai's Yangshan Port in east China on April 27, 2022. Photo / Xinhua, via AP
A container ship from Japan is anchored at the container dock of Shanghai's Yangshan Port in east China on April 27, 2022. Photo / Xinhua, via AP
"The reality is it's still very difficult out there," says Skellerup chief executive David Mair, on the supply chain challenges facing his company and all Kiwi exporters.
Skellerup Holdings does a lot of manufacturing in China and distributes all over the world, so Mair is well placed to offer someinsight into the supply chain crunch that's adding costs everywhere, pushing up prices and causing inflation.
The good news is that Mair believes things are about as tough as they'll get for supply chains - with some signs of pressure easing.
The bad news is that he doesn't see inflation easing fast.
"We've been through this before with oil and energy," he said. "But the shipping issues couldn't have come at worse time.
"We'll get through that, like the last time we had an oil shock. But what I'm concerned about - particularly for New Zealand - is there is an underlying inflationary element here of bureaucratic regulation that slows things down when we need to move very quickly."
So is this inflation sticking around?
"I'm of the view its staying around longer," Mair said. "
"If prices stay high and wages spiral then you'll end up with a new level."
"The issue I have about that is that some countries are getting through that faster and easier than we are, so we may become less competitive."
"What's in the news a lot these days is actually about raw materials and shipping out of China," he said.
But the situation was fluid.
With the lockdowns still going on in China the issue was not so much ports and containers now.
"The issue is truck drivers," he said "So actually getting containers from the factory to the port, getting people from A to B within the provinces. Because many of the provinces have different regulations or controls around who can do what"
And it's not just China.
Skellerup Holdings chief executive David Mair. Photo / Supplied
"Take America, once very five years the Stevedores have these big negotiations about their pay. The LA port is very famous for this. It affects both sides of the US and we're right in the middle of those negotiations now. And the same issue with truck drivers in the US."
Getting a container into the US hadn't been so hard but getting it from near the port to our distribution centre had been huge, he said.
So how long will it all last and can he see consumers getting a break on inflation anytime soon?
"I'm a market guy, I believe that the market will repair."
There were already signs that it might start to ease - such as freight companies in the US that had geared up and taken on too many staff.
"So I believe this will eventually settle down. But we keep having these little shock waves," he said.
Things were probably as tough as they were going to get, but the inflationary effects were likely to last longer than many expected.
"Not only is [it] an increase in price, it's actually availability."
Whereas in the past with key suppliers you might have been able to negotiate on price, "now they'll accept an order but you'll find out the price when they ship. And they might cut back, and give you an allocation of what you ordered."
Skellerup's business model had left it well placed to cope.
"The essence of Skellerup is we make essential products. So although we get a few swings and roundabouts, there is an underlying steadiness."
The strength of the business is the ability to pass on price, he said.
"So we've been fortunate, where the value of what we do is recognised by customers and often we're only one critical component of what they do. And they want certainty."
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