The Wesfarmers Ltd (ASX: WES) share price is on watch this morning amid reports the Australian Competition and Consumer Commission (ACCC) has launched an investigation into increasing global shipping and container costs.
The competition watchdog is reportedly concerned rising shipping costs, brought about by COVID-19-related disruptions, might dint consumers’ back pockets.
Wesfarmers’ subsidiary Kmart holds the crown of Australia’s largest importer of shipping containers.
The Wesfarmers share price finished last week trading at $56.88, 1.5% lower than where it had ended the previous week.
Let’s take a closer look at today’s reporting.
Global freight hike deemed anti-competitive
The Wesfarmers share price is in focus today following reports the ACCC is worried businesses, like those owned by the conglomerate, might have to pass shipping expenses onto consumers.
In its financial year 2021 earnings, Wesfarmers noted it had seen ocean freight charges and delays increase through the year. It stated the higher fees and troubles were due to disruptions and constraints in global supply chains.
Wesfarmers spent $540 million on freight over the financial year just been. That’s 24% more than in financial year 2020.
In April, Kmart’s managing director Ian Bailey told the Australian Financial Review the retailer had turned to the spot container market. Bailey said the switch followed simultaneous delays in shipping and increased demand for its products. He told the publication the business wouldn’t pass the added costs onto shoppers.
However, according to reporting by The Australian, the ACCC is worried about just that.
The ACCC’s chair, Rod Sims, reportedly said the body is investigating anti-competitive behaviour in the freight system. Sims was quoted as saying:
There is a limited amount I can say on it, but we are looking at the freight system – particularly the role that containers play.
According to maritime research and supply chain advisory Drewry, over the year so far, the average cost of a 40-foot container has been US$6,695. That’s 187% more than the five-year average.
Wesfarmers share price snapshot
The Wesfarmers share price has been performing well this year.
It is currently 12% higher than it was at the start of 2021. It has also gained 26% since this time last year.
The post Here’s why the Wesfarmers (ASX:WES) share price is in focus today appeared first on The Motley Fool Australia.
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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.
The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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