There are some extremely worrying headlines coming out of the mainstream press about an issue that has been brewing for a while now. The bottom line is this.
The pandemic disrupted shipping, leading to an oversupply of containers in some areas and a lack of containers in others. Shipping costs rocketed as suppliers all competed for scarce shipping resources and, in some cases, manpower. That problem has yet to dissipate, and is not expected to improve substantially until the end of the fourth quarter next year.
The Loadstar – the logistics and supply chain publication – has been detailing problems for a while now. Over the last few weeks, a specific issue has been building up and it is now hitting the mainstream press, who are, of course, making a meal of it.
But what is the specific shipping problem now, and why is it worse in the UK?
This was the Loadstar last week:
“The UK’s main container ports are overwhelmed with unclaimed imports and starting to refuse the restitution of empty boxes urgently needed back in Asia.
And other North European ports are also heavily congested, but the acute HGV driver shortage in the UK has extended container dwell times – the time a container stays in a given place – significantly in past weeks, with the country’s main box hubs now “in danger of grinding to a complete halt”, according to one industry observer.
This week, Felixstowe suspended the restitution of Evergreen, Maersk and CMA CGM empty returns. Other carriers are also expected to be restricted by the port, but there is no indication as yet that there could be a blanket stop on receiving empty equipment, or that export deliveries could be halted.
In a customer advisory, Evergreen says the block on the return of its empties at Felixstowe was “due to the large volume of import containers coming into the port” against the backdrop of “a well-publicised national driver shortage”. It added: “Import container dwell times are increasing as a result and causing port congestion.”
The carrier said that since the Felixstowe gate had closed, its restitution team had received “a surge of e-mail enquiries” and asked customers to “bear with us” while it processed them. “Unfortunately, we have no choice but to temporarily direct all empty units to Tilbury, Liverpool, Teesport and the port of Tyne,” it said, adding that the drop-off locations were “subject to change”, and suggested that customers “contact our restitution team before returning any containers”.
Evergreen said it would contribute to the extra costs by waiving drop-off charges at the new locations, but shippers are being saddled with substantial additional wasted journey and additional haulage charges. Indeed, one forwarder told The Loadstar the extra cost was as much as £500 ($680) per box. “Merchant hauliers are killing us, charging between £300 and £500 additional for redirecting the empty to another port,” he said.
Meanwhile, in a customer advisory, Maersk said the empty stop at Felixstowe was due to “the high volume of empty containers on the terminal”, adding: “In giving you this information we hope to avoid further congestion and port congestion. We advise that you steer merchant haulage empty returns to London Gateway,” said the carrier, adding that it could also accommodate empty restitution at its feeder ports in the north of the country. “We understand that this is far from ideal and continue to follow the situation closely with the port, and are looking at ways to reopen as soon as possible,” said Maersk.
Another forwarder said: “It’s getting worse at Felixstowe as the days go on – now you can’t deliver boxes back there and hauliers are in the wrong places, which is also having further impact on tonight/tomorrow’s collections.
“It’s going very much ‘tits-up’ very rapidly, with knock-on effects causing greater disruption than the obvious congestion – it’s all being pushed back through the chain. This will be a major issue by next week, I suspect.”
The Loadstar understands that some carriers are now considering skipping UK port calls until the import backlog eases, overlanding containers at Rotterdam or Antwerp for eventual relay back to the UK. The diversions and lengthy delays in relay will constitute a serious threat to the UK’s Christmas market.”
Meanwhile the BBC reports that a spokesperson from the Port of Felixstowe told the BBC that the port currently has 50,000 containers which are waiting to be collected. “It’s not the port of Felixstowe affecting the supply chain it’s the supply chain affecting the port of Felixstowe,” the spokesperson added, explaining that the problems are “similar at all major UK ports”.
Customers have been advised that although there will be “considerable strain” on the UK’s supply chain this Christmas, shoppers should “be sensible, think ahead, plan appropriately” and “not panic, but to buy early for Christmas, if they can”: we all know how well that will go from the last time people were advised not to panic over petrol. Apart from the ridiculous fuss that is being made about an already over-commercialised holiday, however, we do need to be aware that these problems are a) ongoing, b) not confined to the UK but c) exacerbated in the UK because of Brexit.
Andrew Opie, director of food and sustainability at the BRC, also confirmed to the BBC that the Felixstowe congestion is “yet another unwanted side effect of the HGV driver shortage,” adding that “extending the temporary visa scheme to increase the pool of drivers available would provide a short term fix to these problems, and Government must act quickly to prevent further disruption for consumers in the months ahead.” (It has now been extended to March next year, instead of ending on Christmas Eve.)
Meanwhile as we all know, the government recently drafted in military personnel to help with the driver shortages and deliver fuel, and offered 5,000 emergency temporary visas to foreign drivers. The BBC reports inaccurately that these have all been taken up: in fact they haven’t – an embarrassment that the government is attempting to conceal.
Conservative Party chair Oliver Dowden also told the BBC that the government was increasing the number of people having tests and that he would “expect that number to increase as we approach Christmas.” Whether this will have the positive impact that he hopes remains to be seen, as what the Tories seem incapable of understanding is that newly qualified drivers require a lead-in time before they are allowed out on their own: some of the training is done after they have received their licences.
Johnson, of course – currently on an art holiday in Marbella with his family, if the tabloids are to be believed – has denied there was a crisis – nothing new there – but also said that the UK’s “world leading” logistics industry could fix it. So is there or isn’t there a crisis, Boris? Because if there isn’t there’s nothing to fix, is there?
(In answer to this, one Loadstar respondent called the PM “deranged”. It’s a pity the BBC isn’t similarly blunt, instead of floating frightened articles indicating that there is a crisis and then hastily backtracking on them when chastised by its Tory masters as they compel it to toe the party line for fear of losing its funding.)
However, in a further complication, the Loadstar also reports that the issue is not just shipping now, but air freight: the mad dash to avoid container shipping delays has seen some airfreight rates climb by ten times in a single week. Yesterday, Hellmann Worldwide Logistics told customers: “The already tense situation in the airfreight market has worsened dramatically in recent days. An imbalance between supply and demand is emerging, with airlines continuing to convert passenger aircraft into temporary cargo planes, yet finding this is not enough.” Indeed, according to the forwarder, both regular airfreight shipments and charter costs have “exploded” and in some cases, “increased tenfold within a week.”
The Loadstar again:
“Hellmann added: “Many airlines are now operating at nearly 100% capacity, which means airports are heavily congested and global delays are inevitable. This situation is currently evident at import airports such as Atlanta, Frankfurt and New York. With a view to the end of the peak season, we therefore expect this situation to worsen further.”
Dan Morgan-Evans, global cargo director at Air Charter Service (ACS), said there was “unprecedented” demand for charter flights, fuelled by a massive 500% increase in ocean freight rates on the major trade lanes, driver shortages in Europe and the continued lack of belly capacity.”
That sums up the supply crisis: not enough ships, containers in the wrong places, not enough planes. Meanwhile, a word about port delays because of customs.
In case you’re wondering how we’re going to manage when those customs checks eventually come in, our “world-beating” all UK run system . . . oh, I’m sorry, let me put that through again, our “world beating UK system”, which, already having 58,000 + customs officials and targeting, according to the government, an increase of 5,000 had, by December 2020, an increase of just 16 isn’t quite so world beating as the government likes to think.
One UK customs company has just been bought out by a Netherlands company: amid the major bottlenecks in the UK’s post-Brexit border regime, Netherlands-headquartered Customs Support Group (CSG) has acquired customs broker UK Customs Solutions (UKCS). Based in Felixstowe, Nottingham, Glasgow and Dover, UKCS and its 150 staff expands CSG’s UK strength to 210 and its customer base by around 1,000. Fortunately for us, it doesn’t envisage any UK redundancies . . . but the takeover itself indicates that UK companies lacking support from the government or funds to invest in the technology required to operate the new systems are vulnerable – oh irony of ironies – to EU takeover.
Meanwhile, other customs organisations comments on the situation on the ground are interesting.
“I don’t hear any noises from HMRC that it (the customs situation) is being addressed,” said Arne Mielken, owner-manager of the company Customs Manager, talking, again to the Loadstar. “Dealing with brokers, broker management, freight forwarder management, checking invoices, understanding preferential trade under the EU-UK TCA; all of these did not matter before, but matter now. By Brexiting, we have opened a new set of rules that is highly complex and highly difficult to manage – which needs highly skilled people – and we did not invest enough time and effort to develop these skills. Brexit has created a potentially major market for customs specialists in the short-term, but the future is less certain. For us, Brexit has been a good thing – thank you, Brexit, for making customs relevant again! For freight forwarders, customs brokers and advisors, there is a lot of opportunity, and a lot of money to be made. But for the importer, the exporter, the SME (Small and Medium Enterprise) – this is creating higher costs. Some might operate in a market where they can raise prices, but if they cannot, or if their market is not so significant in the UK, they will ditch it. So, this may be a temporary win for us, but I don’t see where Brexit creates an opportunity for them.”
Never a truer word was spoken, unfortunately.
So where does that leave us? Let’s not focus on the run-up to Christmas. Let’s focus beyond that: Christmas is a distraction, nothing more.
There is still a shipping crisis: it’s unlikely to ease before the end of next year, according to industry experts.
It means that potentially in the run up to the end of the year, and into next year, UK ports will have capacity problems which can ultimately only be alleviated by fewer goods being offloaded here, and more being offloaded in e.g. Rotterdam . . .
whence they must be transported to the UK either by smaller ships or by trucks . . .
by lorry drivers who are unwilling or unable to come to the UK . . .
and whose cabotage rights (the capacity for picking up and dropping loads around the country as part of longer trips) have just been further restricted by the UK government . . . (you couldn’t make it up).
Meanwhile, there is still a lorry drivers crisis, and the visas offered are not being taken up, nor can internal recruitment of UK drivers – despite the begging letters sent out in a very “your country needs you!” fashion to retired drivers – actually deal with the deficiency in the short term: this is not a problem that can be fixed in weeks.
And when goods get here, there is a lack of customs officials to deal with them when we bring in checks.
Subsequent to the shipping crisis, which is a global problem, the cost of air freight has skyrocketed. However, even when goods are brought in by air freight, they still have to be transported by . . . our (shortage of ) lorry drivers.
This means that not only are goods usually brought in by shipping in short supply and more expensive – and I am not thinking of food here, I am thinking of e.g. hardware supplies for small tradesmen, plasterers, electricians – if those goods are brought in by air freight to ease the backlog, they will be commensurately more costly with the higher cost of aviation fuel. This will impact every aspect of our lives, and, it seems probable, put some tradespeople out of business.
None of this offers much hope for the next year: the only small consolation is that the more the situation impacts the public generally, the worse it will look for the government politically. Whether this will result in a regime change that will improve matters is, however anyone’s guess. The general public seems quite shockingly tolerant of the Tory party’s deficiencies, and the opposition seems incapable of opposing.
What does this mean for us?
The period of disruption is not going to go away soon. This – higher prices for everything, supply chain disruption, occasional and not so occasional shortages, and denial that there is anything approaching a crisis, is, unfortunately, our new normal.
But never mind, this is “the will of the people.” Or was in 2016, anyway. Can we rethink? No, we’re not allowed to, because some people can make money out of this rolling disaster, so they have a vested interest in it continuing. And that, my friends, tells you everything you need to know about the government of this country.