Market Update

Market Update November

November 3, 2021
Sasha Khan
Digital Marketing Coordinator
10 Minutes

The month ahead

Road freight remains in focus this month, with the HGV driver shortage and fuel crisis continuing to cause strain throughout supply chains. Shippers have been warned to prepare for fuel cost rises and with capacity and congestion still a main cause of concern, our teams are available to provide support and guidance.

Issues on fuel are spreading from the UK across to China, with rationing in place in some regions. Meanwhile, the UK attempt to find temporary solutions to the HGV driver shortage in the lead up to Christmas, many fear that it won’t be enough to solve the problem ahead of us in time. And with new import border controls coming into place from January 2022, we give a heads up to shippers on what is required for the new year.

Diesel rationing China causes further strain

The UK saw an influx of panic buying fuel last month, as the HGV driver shortage caused concern for how fuel would be transported to the UK. Now, petrol stations in China are started to ration diesel with rising costs and falling supplies. Coal and natural gas shortages have forced factories to close and left many homes without power.  

Fossil fuels have seen a surge in price lately, creating a shortfall of supply at a time when demand is booming.  

In China, some truck drivers have found themselves queuing for almost an entire day just to refuel. The rations in place mean that trucks are being limited to filling up to 100 litres of fuel, only around 10% of their capacity and some petrol stations have begun implementing a 300-yuan (approx £34) surcharge to fill up.    

The current diesel shortage is hugely affecting long distance transportation, which will have a domino effect onto supply chains moving out of China, adding yet another strain to the ongoing global supply chain crisis.  

Shippers warned of potential fuel surcharges

As carriers seek to recoil from the rising fuel costs, shippers have been warned to prepare for higher bunker adjustments on top of current freight rates.  

The price of fuel is now at levels not seen in years, with IFO380 bunker fuel now back over $530 per tonne.  

Bunker fuel prices are being impacted by the global increase in energy costs, as we’ve seen with the coal shortage across China, these recent events have led to an impact on rates.  

We can expect a swift increase in all container transportation, as we begin to see an escalation in bunker surcharges applicable across all modes.

Maersk will not be cutting out forwarders

There were concerns last month, when rumours of Maersk only handling cargo directly from shippers come 1st of November were spread. They have issued the following response:

“Forwarders have been, are and continue to be one of the biggest customer groups we have on our ships. [We aim to] enhance reliability in the extraordinary market conditions we see today where demand far exceeds supply. We have informed some customers that we won’t be able to meet all of their expectations, particularly on specific trade lanes, for example, Asia to Europe and Asia to North America, where we have seen unprecedent congestion and disruptions triggered by the pandemic,” the statement noted.

European customs

New Import Border Controls – January 2022

A reminder that full customs declarations and controls will still be introduced as planned on 1‌‌ ‌January 2022. This means:

  • From 1‌‌ ‌January 2022, traders will no longer be able to delay making customs declarations – they will need to make a full customs declaration, or a simplified declaration if they are authorised to do so, in advance of moving their goods if they are using ports operating the pre-lodgement model or the Goods Vehicle Movement System (GVMS)  
  • From 1‌‌ ‌January 2022, border locations without existing controls will need to begin controlling goods – this means goods will not be able to pass through the port unless they have received customs clearance.  

However, safety and security declarations for imports from the EU will now not be required until 1‌‌ ‌July 2022, and some changes have also been made for Sanitary and Phytosanitary (SPS) controls. You can read more on all of these changes here.

If you need to register for the Goods Vehicle Movement Service (GVMS)  

GVMS has been designed to enable fast and efficient movement of goods and will be used by many UK ports.  

From 1‌‌ ‌January, if you’re completing customs processes on behalf of businesses that move goods to or from the EU through a GVMS port, the haulier moving the goods must be registered for GVMS. This may include you, if your company transports goods and completes customs processes. From 1‌‌ ‌January, if hauliers are not registered, they won’t be able to cross the EU/GB border or clear the goods through customs.  

Check if you need to register for GVMS

Find out which ports use GVMS

Ports that use GVMS to control goods will need pre-lodged declaration references to be linked together within a single reference number, called a Goods Movement Reference (GMR). The driver moving the goods will need to present a valid GMR to the carrier for check-in. The driver would usually create the GMR, but it can be done by the haulier manager, or the trader’s customs agent or freight forwarder. There must only be one GMR created per vehicle.  

Our complete European trucking and customs service

We have been assisting our clients with European customs compliance throughout the Brexit transition period and we continue to support on any customs clearance required to date. There have been many changes over the past 24 months, and we’re keen to support businesses as much as possible to enable a smooth movement of goods.  

Now, with current road haulage issues and HGV driver shortages, shippers face even more challenges. We’ve identified how we can ensure our clients eliminate unnecessary efforts and we have launched our complete European trucking and customs service.  

With this service, we can provide an all-around solution by all means of transport to those looking for a centralised process. We have partnered with hauliers across the EU to offer competitive pricing, professional services and strive to be your shipping Control Tower. Enquire with our teams for more information.

UK-France dispute over fishing access

The fishing row has caused further tension between the UK and France post-Brexit, after French authorities seized an English vessel fishing without a license off Le Havre.

France has expressed their complaints over boats being unreasonably denied access to British fishing grounds, where they have historically operated, however, Britain argues that this is simply the terms of post-Brexit agreement.  

France has now warned the UK that strong measures will be taken if the UK do not agree to increase fishing licenses. They have announced that there would be a block on British boats from entering ports, as well as tightening checks on UK boats and trucks at borders. if the issues are not resolved by the 2nd of November. This would severely disrupt the flow of trade, causing further backlog at Dover. We continue to monitor the situation.

The Short Strait User Forum now launched

The Short Straits Users Forum is run by UK shippers and was created with the aim of streamlining Port processes and to get better engagement from all at the Port of Calais, Dunkirk, Dublin & Eurotunnel.  

It provides shippers the opportunity to access and ask questions directly to French customs and Sanitary officials, to check if there is storage space available in the area and anything further that can help facilitate frictionless trade.

The forum's are held virtually, with the goal of finding the best means of optimizing and therefore smoothing the passages from the United Kingdom to France and EU countries, particularly in terms of customs and sanitary and phytosanitary controls.      

We are now encouraging our clients to join the forum and stay involved in the latest developments in UK and EU trade.      

The plan is to convene the forum every four weeks or so and address different themes around trade between France and England. The more experiences we share the better we will help ourselves.

The next Short Straits User Forum takes place on Thursday 2nd December. Click here to join the discussion.

Freight Rates  

Freight rates have continued to climb over the past two years. We have seen many shippers, including our own clients, struggling to keep up with the drastic increase. Over the past year, shippers continue to ask, ‘when will the freight rates drop?’  

Asia to Europe remains steady, with no significant change in rates as of yet, which we can see in the chart below (source: Statista). As reported last month, selected carriers have chosen to freeze rates into the new year, which has helped stabilize the environment.

However, for the first time in months, we’re seeing a dip in rates from Asia to West Coast USA. According to the South China Morning Post, the spot rate for shipping a 40-foot container from China to Los Angeles has dropped by 51% from $17,500 last month to $8,500. Freightos also reported that shipping costs between Asia and the US dropped 16% last week, the first significant dip since August. The below chart shows the the global freight rate index across July 2019 to October 2021.

Asia-Europe capacity

Supply chains over the past year have battled with a series of challenges, from growing freight rates, heavy port congestion and obtaining container space. However, the HGV driver shortage is now causing more of a concern than the issue with capacity.  

Space on the Asia westbound to Europe still remains at a huge premium and obtaining equipment still poses a challenge, given the widespread displacement.  

No signs of port congestion easing

From January 2021 to current, volume has been up around 47% YOY, averaging around 568,000 TEU. The port congestion we’ve been seeing worldwide has showed no signs of easing up. Container ships directed towards Hamburg, Rotterdam, Felixstowe and other ports in the region have been forced to anchor until berths become available.  

According to Sea Explorer, there is ‘extreme congestion at several terminals’, with some terminals refusing to accept empty containers altogether.  

Port of Felixstowe

Last month, Felixstowe, the UK’s biggest container port struggled to cope with the volume of cargo passing through. As they entered peak shipping season, the port was forced to turn away ships arriving, with vessels being diverted to other UK ports.  

The congestion worsened with the shortage of HGV drivers, with a significant drop in the number of container collections, and the labour shortages at the port which hampered efforts to unload and reload ships.  

With the shortage of truck drivers, the speed flow of unloading containers is now taking twice as long. In a normal instance, containers are out of a terminal and into a warehouse within four to five days. Today, the average dwell time is closer to double that for import containers compared to 2020.  

The port, which handles 40% of the UK containerised imports and exports has been reported to have as many as 50,000 empty containers at the port, out of a total capacity of around 145,000. Stack density has reached 92%, far above the levels needed for a functioning container yard.  

A Felixstowe Port representative said that the ‘situation was improving, and it had more space for import containers than it had had at any time since the start of July.’ They added: ‘We are working closely with all our shipping lines customers to accommodate their vessels.’  

Freight rates: Market Snapshot

Whilst some carriers have chosen to freeze rates until the new year, capacity is still limited. We recommend getting in touch with your Unsworth representative to touch base and ensure you have a clear idea on what to expect for your shipments over the next few months. We have been working to find solutions that help shippers keep their goods moving ahead of Christmas.

Ocean: Rates remain steady, with a significant drop on the Asia - West Coast North America routes. Asia - Europe still remain high but no signs it will jump any further.

Road: Driver shortages and fuel issues mean surcharges are in place to help carriers recover. This is driving up spot prices overall.  

Air: Strict control measures at PVG airport have resulted in 40% flights being cancelled for the next month. Rates remain high due to lack of capacity and increased demand.

Knowledge Hub

We have delivered a webinar in the past month to help shippers tackle the challenges of congestion, capacity and cost. You can watch this webinar via our Knowledge Hub.  

We recommend utilising the resources on our website, such as articles, whitepapers and webinars to access vital information and updates across global trade and EU customs compliance.  

How can Unsworth help?

We are committed to supporting and guiding our clients on the smartest shipping options, given the current state of trade. The complexities of shipping, especially in the lead to peak shipping season, have left many businesses struggling to obtain container space, secure guaranteed delivery dates and work around the rates. We’re encouraging shippers to consider LCL movements, where feasible, to help lower initial outlay on high freight costs and getting some goods on the move and keeping product in stock.  

As usual, we strongly encourage our clients to take advantage of our technology driven platform, Pathway. This platform was designed to provide our clients unrivalled control over their supply chains, allowing them to position themselves in a place where they can better react to unexpected events.  Get in touch with our team today if you have any queries about any of the topics discussed in this document, and we will be sure to help you in any way we can.

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