Everyone need to be aware of the continuing issues with shipping from China to Northern Europe particularly the UK. Rates have increased to a level never seen before and at a break neck speed. 40ft containers from main China ports such as Yantin, Hong Kong, Ningbo and Shanghai in July where around 2000usd per container. Sailings in the last week of December rates are around 9000USD per 40ft container. This is  almost a 5 time increase in cost and for price sensitive goods this is very bad news. For many shippers this can actually swallow up all the profit on their products making it a stark choice of not shipping or having to increase prices dramatically to offset these rises and hoping their clients are will to pay the increase.

In the UK the problems began with the Port of Felixstowe severely underestimating the bounce back in demand and the amount of PPE containers coming through the port. Severe congestion led to shipping lines re-routing to London Gateway and Southampton. These ports rapidly then become congested as well. A shortage of haulage and PPE containers staying on  quays longer than normal resulted in vessels leaving the UK without the normal amount of empty containers on them. This resulted in equipment shortages within China main ports. The large port delays for getting a berth and unloading vessels (7-10 days) has resulted in many shipping lines having to cut out UK port calls and discharging all containers in other European ports such as  Rotterdam.  The situation has got so poor in the UK that some of the shipping lines have been refusing bookings and putting more pressure on the space that remains out of China. As mentioned earlier the above normal container imports have resulted in mass shortage of UK haulage, with it being necessary to book haulage 3 weeks in advance just to secure a slot.

Co-loaders (those who offer services to move individual pallets as LCL freight) have been reporting that all of their spaces has been used up and they are having to buy space at market spot rate. The result is the have had to pass the massive rate increases on and there are now surcharges as much as  high as £100GBP per cbm to UK ports. This is on top of the normal sea freight charges. Some co-loaders are having to refuse to take large volume bookings from new customers (who are unable book full containers directly) or are charging a further surcharge in order to ensure they have shipping space for existing clients.

What can a shipper do? For many shippers who can manage without stock then it is a waiting game. These issues are expected to peak around the Christmas and New Year period with several shipping lines having some sailings suspended.  However large disruptions may well continue on to around the Chinese New Year in February. After this vessel schedules will have returned more to normal, along with container equipment flowing back into China there will be more space available. Rates will then begin to fall, hopefully at the same speed as they rose. Until the Covid crisis is finally brought under control by the new vaccines shipping rates may remain much higher in the first half of 2021 compared to the first half of 2020. Shippers should also try and ensure that get at least 7 days free quay rent and 10 days container detention time. Often Chinese freight rates only have 5 days free storage which is one reason they are often cheaper than UK sourced rates. At the moment money saved on freight is often offset by high quay rent bills, so all shippers should be aware of this.

The situation at the UK main ports can only be described as nothing short than complete chaos. Port of Felixstowe severely under estimated how much traffic would come through the port after the initial Covid 19.  This has had lasting impact on trade which has resulted in berthing issues and slow discharge of vessels. Combined with a shortage of transport has meant containers having to have the haulage booked over 14days before arrival in order to get a delivery slot. Even doing this is difficult as vessels find they have no berth on arrival and so either wait or the shipping line having to change their port rotation meaning, or being slow to discharge. This all means containers which have had the freight booked out in China are regularly running out of free quay time due to most only having 5 or 7 days free rental.

Even when hauliers have got a Vehicle Booking Slot (VBS)  they then end up having to wait may be a couple of hours on the quay to get their container loaded or off loaded. This then results in delay to customers warehouses, which in turns delays the next job the haulier has planned. Overall the delays progressively get worse and worse throughout the week and then start again the next week.

This has not just effected full container load shipments but has had a significant impact on LCL operations through Felixstowe. Normally LCL shipments are devanned within a few days of arrival. It is now taking up to 14days for containers to be devanned at Felixstowe/Ipswich ERTS and the delays keep building up as the consolidators struggle to get their containers off the quay.

Just to compound all of this the strong winds we have had in the UK over the past few weeks has made the situation even worse as the ports have had to shutdown all operations,which has added even more berthing and loading issues. As a result of these issues at Felixstowe more and more container traffic has been diverted into London Gateway and Southampton. These ports are struggling significantly due to the increased volumes. This has lead to some shipping lines and consolidators introducing or planning to introduce congestion charge fees. These can be as much as £150 per 20ft Container (so £300 for a 40ft or 40ft HC container).

Customers should be aware that despite this issue being entirely down to the ports being unable to manage the shipping traffic they will still be charging demurrage and other related charges which will unfortunately have to be passed on to you. There is no ability to claim back any of these charges from the ports. Several freight forwarders have been in contact with BIFA to see if they can intervene in the situation but they have been so far had little success in being able to get matters to improve.

For both importers and exporters in the North of England the alternative use the less congested feeder ports such as Immingham, Liverpool and Grangemouth. While it adds additional transit time of around 5 days and extra cost this is easily now being offset by all the delays and charges at these ports. Use the contact form to send us details and we will see how we can assist you.

This is the thirteenth update on the continuing effects the Coronavirus is having on the logistics and supply chain sectors. In general news the USA is beginning to reopen up even while it is still showing increasing infection and death rate.  This is reflected in the financial markets, despite the terrible job loss news out of the USA and continuing tensions with China, the DOW, S&P and Nasdaq are now powering ahead refusing to pay attention to this bad news. It is shrugging off any fear about long term effects of all these shutdowns on the world’s economy. The Nasdaq may even break the 10000 barrier with the next week. This rally appears to have caught many market commentators by surprise with initially everyone saying the initial rally off the previous lows would not last. If the markets are right then it will mean the logistics sector will be back in demand at least by some sectors. However it is still unlikely that the Oil and Gas sector is going to recover much over the next few months with oil still below 30USD a barrel and long term contract prices are currently not forecasting much of an increase in demand.

Returning to the UK and despite the newspapers and other media outlets trying to imply the lock down in the UK is going to be all gone by soon, the reality is the UK government is only expecting to announce a very slight easement of restrictions on Sunday. This may include allowing garden centres to reopen and people to use parks to relax in. Scotland has decided to continue all its measures unchanged for another 3 weeks showing that this crisis is still far from over. Vaccine trials have begun with estimations of a workable one being available anytime from September this year to September 2021.

HackerNews had a thread this week on sellers looking for alternative e-commerce markets to Amazon. The thread discussed how sellers where getting disenfranchised with one of the worlds market and looking for alternatives such as Shopify. Several website designers noted that they were busier than ever with requests for setting up individual operated e-commence sites. For the logistics sector this means there will be more potential clients out there looking for fulfilment services, from devaning containers to reverse logistics. This may reverse some of the losses over the past decade to Amazon. Though with the current market share Amazon has is unlikely to be concerned at the moment by this development.

Ocean freight services are still seeing serious imbalances on availability of equipment and space on some routes from Europe to Asia and the MiddleEast. As a result shipping lines are coming up with new emergency surcharges which they can add to existing rates this includes an ESS surcharge which is short for Emergency Space Surcharge. This does not mean shippers will be guaranteed space, just they will be guaranteed the extra charge.  The continuing in balance in trade is also seeing Peak Season Charges being introduced. Overall exporting from the UK is in general going to be more expensive for the next few months.

Lloyds has reported that more and more vessels are now choosing to transit via the Africa Cape rather than via the Suez Cannel due to the very low oil bunker prices meaning it is becoming more cost effective. The one downside of this is the increased levels of pollution from these vessels burning more fuel due to taking a longer route. In the UK the expected shortage of container storage space has not occurred with currently there being no real issues for shippers looking for off site storage of incoming containers.

Once again airfreight is still in high demand for shipping from China to to the rest of the world. Medical and other related Covid-19 supplies leading the demand.  Some airfreight industry reports are now showing that the decline in airfreight space has finally reached a bottom and is beginning to show signs of increasing in the 1st week of May. However rates are still much higher than previous years even though oil is lower. Some shipments are still attracting additional cargo handling charges when they arrive at European Airports. May will be an interesting month overall to see how trends are going in this sector.

This our twelfth update on how the COVID-19 virus is impacting the Logistics sector. Briefly in general coronavirus news, the UK is planning how to ease lock down with the UK government saying we are now past the peak and next week will issue updates on how it plans to go about doing this. However we have not had confirmed that the 5 points that need to be fulfilled for removing the lock down have actually been met yet. Despite this many more shops are opening up and road traffic has increased considerably over the past week. Many construction sites are starting up again or have plans to restart which will drive demand for more construction goods and increased road haulage. It is not only the UK looking at easing restrictions, several other countries included some of the currently worst hit Italy and Spain and looking to relax the much tighter controls. Further afield both Australia, New Zealand and South Korea are all report no new local cases and have begun to remove their restrictions. However Germany has decided not to ease their restrictions as they noticed a slight increase in cases.

Returning to the logistics sector.In airfreight it is now reported that rates have now begun to rise out of Hong Kong after being much lower than other mainland China areas such as Shanghai. This is driven by shippers trying to find alternative routes routes which are not only cheaper but also have spare capacity. Airlines in general are suffering particularly the ones loaded with debt and limited cash reserves. In Australia Virgin has already gone into administration basically destroyed by the huge debt mountain it had. In the UK Virgin airlines future is also not looking very good. The airline is 49% owned by Delta with the rest by the Virgin group. While it has made some profit in the past the previous couple of years have not been particularly outstanding and is very vulnerable. If it does go then it is going to create a hole in airfreights routes out of Manchester and leaving BA with reduced competition on several routes.

Ocean freight is still seeing blank sailings being announced as shipping lines struggle to try and match supply with demand, especially from Asia. However the industry is beginning to see the situation stabilise. Rates have fallen slightly for May sailings across some routes. However forwarders in Asia are still facing difficulties in getting load containers to the port and overall cancellations as factories remain shut or on reduced staffing levels so are unable to load containers. Within Europe there are reports of capacity to store incoming containers running low with offsite container yards filling up. The shipping lines introduction of services which shippers can delay the containers on routes at transshipment hubs can help the situation. But this is all additional costs which some party in the supply chain will have to eventually take.

Larger logistics companies are having to rapidly adapt what will be the post coronavirus world.  While some are expecting the demand for logistics to rapidly rebound later in the year others are not as sure and have begun laying offer employees. DSV one of the largest forwarders in AJF’s local area has been reported it plans to reduce its freight and logistics personal by nearly 10%, citing expected lower demand for services because the decline in the world economy.

Overall while the currently worst hit countries appear to be getting a hold of the virus, without any cure or vaccine available the outlook still looks unsettled with the risk of a secondary wave of infections, and economies all around the world severely impacted.

Our eleventh update on the current effects of the Coronavirus on the logistics and supply chain sector in the UK and worldwide. In general terms there are now over 139000 confirmed cases in the UK with the daily death toll dropping slightly. The UK is attempting to roll out a testing system for key workers and a new centralised website to manage the distribution of PPE equipment, however both are delayed in getting operational. While there is still a lock down in the UK, there are increased signs of activity with more traffic on the roads and more commercial premises such as B&Q reopening. Apart from Scotland there is still no published lock down exit plan. The government is still concerned by a second wave of infections and over whelming the NHS.

The Road Haulage Association(RHA) and the Chartered Institute of Logistics and Transport have sent a joint letter to the UK government raising the plight of haulage operators and the financial duress they are under. They write in the letter that their current market intelligence says that now almost 50% of the UK’s lorry fleet is parked up and operators are experiencing severe cash flow issues as their customers delay payments. Significantly the letter mentions the very low profit margins in this sector which is part of the overall issue of haulage. It is very difficult to build cash reserves if your daily revenue only just covers your operations.

In the letter they ask the government to consider 5 areas which if implemented would assist hauliers:

Meanwhile in all of this decline the shipping line HMM (previously called Hyundai Merchant Marine), has launched the HMM Algeciras container vessel. This container vessel at nearly 400m long can carry almost 24000 20ft containers making it the worlds biggest ship in the Ultra Large Container Vessel category. Maersk originally had the title before MSC took it in 2019.  HMM currently still have plans to run it on their Asian – Europe service, being a “THE Alliance” member. However whether there is going to be the cargo available to fill this ship both now and post Coronavirus will be interesting to watch.

There are more warnings form the UK Warehousing Association that there is still increasing risk of lack of storage for containers and palletised goods. The UKWA have issued advice to importers to start looking for additional space before the goods arrive in the country. This is especially important for cargo that is imported to meet a seasonal demand and has now missed the selling period and needs to go into long term store. The limited space available means that there is a possibility that importers may incur significant storage at the port quay or in an ERTS warehouse while they try to locate warehouse which will accept the goods for long term store.

Any anticipated decline in airfreight demand out of China along with pricing has not yet happened. Rates from Shanghai to Europe have reached nearly 9USD per kilo, with some spot rates approaching a staggering 15USD per kilo. Shipments out of Hong Kong have not be as severely effect with limited or no change in pricing in the past couple of weeks. With forwarders still reporting very high demand due to containing needs for PPE equipment in all countries around the world. In Europe there is continuing to be an active discussion over the introduction of handling surcharges by the airport ground handlers. Menzies Aviation report that this will not be applied to any goods classed as medical equipment or PPE. How long these surcharges will be in effect for are not know at the moment.

According to a new report put out by Shipping and Freight Resource, most of the forwarders asked believed they could fully recover from the effects of the virus. However almost half of them believed it was going to be a slow recovery with another third believing it will be a moderate speed recovery. One long term significant impact was over 67% of those asked planned to invest in technology to improve how they operated. The overall immediate picture is one of significant concern for some sectors. However it appears that once the crisis is eventually over, companies will be able to recover. This of course will depend on how long the crisis continues for.