Coronavirus, Brexit, the Suez Canal; the past year global trade has been thrown curveball after curveball, challenge after challenge, problem after problem. In a regular trading environment, May tends to be a quieter season for shippers, however, there are many hesitations as to whether this will be the case. Carriers are looking to find a balance between supply and demand; shippers are facing the risk of further capacity reductions; and there is the potential possibility of Peak Season Surcharge (PSS). As it stands, we all need to expect the unexpected.
The supply chain industry had only just begun to recover from the effects of the pandemic that caused a standstill on economic movements, which suddenly shifted to a surge in demand, causing ports struggling to keep up and are now powering through at full capacity. We expect that the surge in consumer demand and a decline in container availability is due to continue throughout May. Rumours of blank sailings are floating around, with them expected to be announced at short notice, as we await more knowledge on the impact of the Suez Canal backlog.
More recently, the seven-day blockage to the busiest trade lane in the world caused a severe backlog and whilst the canal may be free, businesses can expect to feel the impact for months to come.
In the next two weeks, we will feel the back lash of the Ever Given blockage and delays. The vessels that were delayed will now start to arrive in waves, causing huge congestion in UK ports. Turnaround time for FCL’s will be more than 48 hours and LCL devanning time will go from 48 hours to 10 days.
Global port congestion is going to be a huge problem looking ahead, with ships unable to dock at key gateways, an influx of traffic arriving simultaneously to ports and often resulting in cargo missing connecting ships or trucks, leading to even more scheduling problems.
As port officials still scramble to direct the cargo ship traffic jam through the canal, this weeklong delay will cause issues across all points within businesses supply chains. Another added pressure to an already heavily strained system.
The Evergreen incident is a constant lesson to those who don’t insure. Insurers have warned that only a handful of vessels have accounted for delay cover, with an overwhelming majority of those stuck in the canal gridlock might not be able to reclaim sizeable expenses.
It is suggested that around 90% of vessels have not covered themselves; with no real picture on the arrival of vessels to their final destinations, will only add to further industry woes.
It’s anticipated that we’re looking at extensive and lengthy litigation and after the most complex general average claim of all time, associated parties must prepare themselves for a complicated process to get their freight released.
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A brief overview:
What we’re consistently hearing from our clients is that they are having issues with their bookings taking much longer than planned to arrive, increasing the risk of stock issues in the UK.
There is a huge challenge to find the balance between supply and demand but the increase in rates is a persistent cause for concern. We started to see a downward trend in rates that we thought and hoped would continue, however, high volume, the ongoing Covid challenges and the delays from the Suez Canal have caused rates to skyrocket instead. Many clients held back on shipping in April, hoping the downward trend would work in their favour, however, they are now stuck in a position where they have no choice but to accept extremely high rates just to ensure they get their goods where they need to be.
We’re seeing a bit of a lull, as China are currently on a national holiday, so it’s been a little bit quieter, allowing some breathing room for the current pressures. Customers who haven’t secured space for next week will be rushing to find something, posing a difficult challenge and forces the industry to feel the repercussions.
Delays aren’t going away anytime soon, so it is more important than ever to prioritise visibility and flexibility, with contingencies in place to help you plan for the unexpected.
We continue to encourage you to explore ways to build resilience within your supply chain that can help build and strengthen contingency plans. Ensure you have assessed major chokepoints and budgeted for time delays and fluctuating rates. Have you utilised your free access to Pathway and understood how to maximise the benefits of this platform? If not, book your demo here.
We can’t stress the importance of forecasting enough. Reach out to our teams or your account manager today to discuss your forecasts with them and understand what position you will be in when it comes to availability and rates. Haulage availability will be near impossible at this point, so our teams have been asking customers to secure their spots as far in advance as possible.
Let’s keep in touch.