The month ahead

The past year has seen all modes in the supply chain put under immense pressure. Issues in the maritime sector in particular are significant, as any impact can cause drastic knock on effects throughout the route. Current market conditions are brutal, and perhaps the most challenging times that this sector has ever faced.  

The waves caused by Covid-19 continue to cause uncertainty, as we saw from the port of Yantian, just a few cases caused such huge disruption. In the UK we're feeling backlash of the "ping-demic", where many workers are being forced into a 10-day isolation period causing a collapse in infrastructure across many industries.  

We take a look at the latest on congestion, carrier reliability and freight rates and our experts provide insights that keep you up to date and informed.

The chaotic track and trace 'Ping-demic' leads to driver shortages

More than half a million people were pinged by the UK government's track and trace app in the first week of July, causing absolute chaos nationwide. This is due to large numbers of people being told tothrough the NHS app leading to staff shortages and business closures.

Richard Walker, managing director of Iceland, said that “Staff absences rose by 50 percent last week and the trend is sharp and quick, not just affecting our own colleagues but those throughout our supply chains and logistics networks.”

Walker's comments reference the extreme shortage to hauliers. Road transport struggled to cope with this period of the pandemic after nearly 90,000 lorry drivers were unavailable, meaning delays in essential deliveries to shops and petrol stations.

Unsworth's own Charles Hogg, Commercial Director, has been away from the UK implementing an emergency action plan after losing two distribution sites due to staff being pinged. We've had to staff these sites with people from other parts of the UK. He urges the government on clarity, guidance and steering on how to deal with the worsening situation so businesses can focus on what they need to be doing.

EU Imports

The Government has been phasing in border controls for most goods throughout 2021. They announced a new timetable for introducing import border control processes, with full controls effective from 1 January 2022. This gives businesses more time to complete customs declarations on goods imported into the UK from the EU. While tariffs are still payable where they are due, this payment may be deferred. The EU has introduced full customs controls from day one.

You can find a fully comprehensive document on the Government’s Border Operating Model, which provides overview of customs processes, both imports from and exports to the EU.  

We recommend you familiarise yourself with the processes as soon as possible to allow your businesses to be fully prepared. We saw a lot of chaos when new export controls came into force earlier this year, and we want to enable our clients a smooth and frictionless transition.  

Sri Lanka ship blaze

Sri Lanka residents are still feeling the tragic effects of the X-Press Pearl ship fire. ontinue to wash ashore, almost two months after the incident involving a container ship which caught fire while anchored off Colombo’s port.

The X-Press Pearl was carrying 1,486 containers and burned for two weeks. The vessel then sunk, causing one of Sri Lanka’s greatest environmental disasters.

It is believed that the blaze was caused by its own chemical cargo on board, which included more than 22 tonnes of nitric acid and other chemicals, most of which were destroyed in the fire.

Could the X-Press Pearl fire have been avoided?

The nitric acid leak aboard was discovered at Hamad Port in Qatar, which refused the vessel's request to discharge the container, and then again denied at Hazira Port in Gujarat.

Both ports claimed they had insufficient labour and equipment to discharge the leaking container. Ports may be reluctant to accept hazardous vessels due to the lack of emergency and contingency plans in place, as the the training and maintenance of necessary equipment would pose a huge undertaking, although one that may have prevented such a disaster, had either port offloaded the container.

The Ever Given sets sail after deal signed

The Ever Given, after spending three months under arrest in Egyptian waters, is finally resuming its voyage after a compensation deal was agreed between Egypt authorities and the vessels owners and insurers. The Ever Given set sail on the 7th July, resuming service to European destinations, but has been forced to drop the Hamburg port call due to "concerns surrounding navigation safety."

Terms of the deal were not disclosed but Egypt had demanded $550m (£397m).

Global port congestion forces carriers into schedule changes

The bottlenecks and delays at ports that the chart shows around the world is a direct result of the wider breakdown in supply chain infrastructures, all initiated from the pandemic. This was all sparked from changes in consumption habits, as well as reduced port and inland productivity during the early pandemic days.  

Any hopes that congestion would ease into the second or third quarter were quickly eliminated once the Suez Canal became blocked by the Ever Given and then again when Yantian Port shut down. Whilst the Yantian is recovering and is back to full operations, there is still a heavy backlog to work through.

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Over 300 vessels, the most in the history of container shipping, are currently waiting for berths around the globe.

In the recent months, Maersk and MSC extended the omission of Hamburg on their AE7/Condor Loop 4 for a further four weeks, instead discharging cargo at Bremerhaven.

Maersk have also made the decision to cancel the Hamburg call as "a result of high yard density and exceptional waiting time."  

Most recently, THE Alliance said it was temporarily dropping the eastbound call at Rotterdam of its Asia-North Europe FE4 loop for seven weeks, with immediate effect, “due to the ongoing congestion situation”.

Carrier and Schedule Reliability

Global schedule reliability has been unsettled for the past year. On time arrivals drastically dipped in May 2021 to 38.8% compared to 74.8% in May 2020. When compared, Maersk had a schedule reliability of 46.2% with Evergreen at the bottom of the list with a figure of 25.1%.  

Due to the global circumstances, delays have been inevitable, with an average delay for late vessels at around 5.86 days, with many vessels arriving from the Far East to Europe more than 20 days late. The Suez Canal blockage only added to an existing problem but is not the sole cause of this problem.  

What is the immediate impact of high volumes and late arrivals?

The current congestion at ports will remain in it's current state, with berths not necessarily available . We're now seeing many ports struggling with productivity issues due to Covid-19 restrictions, as we saw with Yantian port first, operational planning becomes severely tricky.  

In addition, we're seeing onshore workforce and equipment shortages and it's causing a real stagnancy in processing times. Due to this, quay rent and demurrage costs will only increase.

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Freight rates

Last year we saw a complete standstill to global trade, as the pandemic forced ports (and the world) into lockdown. With consumers completely changing their buying habits and people spending less on travel and more on physical goods, the demand soared much faster than the industry could keep up with. Throw a pandemic, major waterway blockages and port closures into the mix and we find ourselves in a problematic situation.  

The big question now is when these rates will finally drop? But in order to predict when the rates might even begin to drop, we first have to understand why they are so high in the first place.

The drastic surge in demand for goods and a shortage of empty containers at Asian ports have sent container-shipping costs rocketing. Asia to Europe routes reaching record-breaking highs, as they've more than quadrupled in less than a year, as shown on the graph below.

The only thing that will really ease the congestion and delays can only come from a drastic decrease to consumer demand. The less demand for goods, the less shippers will be in need to transport more goods and would give the industry a chance to catch up.

How can Unsworth help?

The past year has demonstrated that the global supply chain is extremely brittle; carrier and port capacity has been stretched to its limits, it's proven difficult to increase capacity quickly and it is becoming more evident that all parties need to be expanding capability at the same time.  

Capacity on the Asia to North Europe trade is becoming skewed towards larger vessels and those with profitable cargo are being prioritised by carriers over recouping empty containers.  

It's becoming vital that carriers as well as shippers need to be re-evaluating their commercial relationships and agreeing service levels to maintain healthy supply chains. The current level of rates is just unsustainable, but we're already anticipating that these rates are here to stay until Chinese New Year 2022.  

It’s key to put yourself in a position where you can react to schedule changes, plan around delays, speed up shipments to cover stock shortfalls to help you on your way to a more powerful supply chain. Our teams are here to support you, and we encourage you to get in touch with your Unsworth representative if you have any questions.