This Week in Imaging: How Conflict in the Middle East Affects the Printer/MFP Industry

Source: Britannica.com

One thing that caught our eye recently was Ricoh’s most recent quarter, with net income down 11.3 percent year-over-year.

Ricoh cited ocean freight issues affecting earnings for its Office Services business, noting “Sales and product mix did not reach forecast levels owing to delays in delivering MFP because of ocean freight issues, overshadowing Office Services earnings growth.”

Previously skyrocketing ocean freight prices were due to China’s strict pandemic policy that resulted in the shut down of many ports in China in an attempt to stop the spread of COVID-19. Those ports have since been reopened.

However, since about October 2023, when the war in Gaza began, Houthi militants in Yemen have been protesting that war by launching missiles at ships passing through the Red Sea to the Suez Canal in Egypt (then to the Mediterranean Sea, and to Europe, North America, and other regions).

Because of the attacks in the Red Sea, shippers have been taking a much longer and costlier route. For instance, shipping from Dalian, China, via the Red Sea and the Suez Canal to Rotterdam in The Netherlands is about 11,000 nautical miles and takes about 48 days. However, the alternate journey is around the Cape of Good Hope in South Africa and is about 14,500 nautical miles and takes about 57 days.

According to shipping platform Freightos, the result of the costlier South Africa route is that freight rates more than doubled from around $1,200 per trip in 2023, to a January peak of $3,400. The chart below shows the increase in shipping costs from January to June 2024.

Source: Freightos.com

Many products are on those ships, including printers and copier/MFPs being transported from factories in Southeast Asia to markets in Europe and North and South America.

When can we expect the Houthi attacks to end and the Red Sea to be safe again for commercial shipping? First, the attacks may end if a cease-fire is negotiated between Israel and the Palestinian state. Second, in December 2023 in response to the attacks, the U.S.  launched Operation Prosperity Guardian to insure safe shipping in the Red Sea, and to stop the flow of missiles to the Houthis, which appear to be obtaining them from Iran. However, the current prognosis isn’t good, as the attacks continue, with the Houthis threatening to expand them.

The good news is that while current shipping costs remain high, they are much lower than pandemic-era costs. And while Ricoh appears to be struggling with them, other companies such as Sharp and Toshiba Tec reported much-improved financial results for their MFP businesses, with shipping cost increases having less of an effect on earnings.

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