Supply chain pressures continue to charge on, with Covid-19 concerns causing further disruption across China just as we approach peak season ahead of the holiday period. It’s around this time that retailers and shippers will be looking to move more goods than normal, to ensure suitable stock levels for the busy shopping season, however, congestion and lack of space will continue to add strain and pressure on supply chains.
There have been considerable issues across both maritime and ground sectors, between extreme freight rates and HGV driver surcharges, many businesses are struggling to keep up with the costs to move goods.
In the past month, we have seen major ports forced to close terminals, hauliers imposing surcharges to help retain their drivers and freight rates reach record highs yet again. We advise on port congestion, carrier reliability and current rates, with our experts providing insights to keep you up to date.
Strict disinfection measures are in place under China’s ‘zero-tolerance’ Covid-19 policy, causing further backlog and congestion at major ports. Last month, we saw the world’s third-largest container port close one of their terminals that handles approximately 20% of movements after a single worker had tested positive. Since then, several vessels due to call at Ningbo have been diverted, after reports of over 50 container vessels were queuing to berth.
The zero-tolerance policy, whilst a good move for the pandemic, has only added more strain to extremely fragile supply chains. Dawn Tiura, chief executive officer of Sourcing Industry Group, a U.S.-based association for the sourcing and procurement industry says “This timing is very tough considering the uptick in back-to-school and return-to-work shopping in addition to the upcoming holiday shopping season."
There are many concerns over how the rigid policy is affecting China’s economy, with the restrictions adding to queues at major transportation hubs, due to staff shortages and port closures.
China's Ministry of Transportation has ordered all ports to have special teams to deal with foreign vessels and required their crews to have health certificates or negative tests before allowing them to load and discharge cargos.
Shanghai Pudong airport, the world’s 3rd largest airport, has had to suspend a significant number of ramp operations at the PACTL terminal. Recent reported cases of Covid-19 have meant that services to loading and unloading aircraft will be affected indefinitely. In response to this partial suspension, many have cancelled flights into Shanghai Pudong airport.
As a result of the flight cancellations, it is anticipated that rates will increase and capacity to reduce by more than 30%. Clients with air freight shipments ex-PVG are highly encouraged to get in touch with their Unsworth representative immediately.
Other terminals across Shangahi Pudong are currently operating as normal, but we can expect that the closure of the PACTL terminal will have inevitable effects on surrounding terminals.
After limited services for over two weeks, the Meishan Terminal is due to resume full services from the 1st of September. It has been reported that there were approximately 44 ships waiting to dock earlier this week. Many shipping lines have been attempting to work around the closures, with many making the decision to avoid Ningbo port altogether causing vessels having to adjust schedules meaning that neighbouring ports were challenged with cargo overflow.
With China being such a vital component to all global supply chains, any shutdowns and delays are heavily felt across the whole chain.
The reopening of the Meishan Terminal at Ningbo, one of the most important gateways for Chinese exports, should ease a bit of the strain that China ports have been seeing over the past month. It has been estimated that it will take around 10 days to two weeks to clear the backlog.
The government has been phasing in border controls for most goods throughout 2021, with new import border control processes in full effect from 1st January 2022.
At the start of July, HMRC issued a warning to businesses of rule changes for trade with the EU. This included requirements for Export Health Certificates (EHC) and pre-import notifications via IPAFFS from 1st Oct 2021, leading to full import controls in place from 1st January 2022. There has been a strong emphasis on appointing a customs intermediary to assist with changes, to ensure businesses do not find themselves in a position as many did at the beginning of the export changes earlier this year.
We are hosting a webinar next month in collaboration with the Food and Drink Federation (FDF), where we share vital details on the changes coming up. We are working hard to help prepare businesses for the end of the easement period as well as ensure they are fully aware of the documentation needed to continue trading with ease.
Join us on the 10th September at 11am, where our expert panel will take you through the key guidance, providing you the knowledge and tools to tackle the changes with ease.
Earlier this month, HGV drivers across the UK were planning strike action, after feeling exploited and taken for granted by companies hiring them. The strike gained the interest of around 3,000 HGV drivers and a strike of this magnitude caused huge concerns over the effect this would have on the shipping industry, as it would further amplify food shortages and debilitate already fragile supply chains.
Deterred by long hours and low pay, the haulage sector has struggled to hang on to qualified HGV drivers and find new recruits for years has become critical since Brexit and Covid-19 pandemic. The Road Haulage Association (RHA) shared that around 30,000 HGV driving tests didn't take place in 2020 due to the pandemic, adding that we had reached a historic shortage in drivers.
In an attempt to hang on to their most critical resource, hauliers are imposing “driver retention surcharges” to help offset the cost of incentives needed to avoid experience drivers being poached away. Tesco began offering drivers £1,000 joining bonuses and in similar efforts Morrisons began to implement training schemes for staff to become lorry drivers.
This is an evolving situation, but we are already seeing hauliers imposing £100 surcharges on each load and we fully expect the practice to be swiftly by all hauliers, as the industry tries desperately to stem the outflow of their drivers.
Global schedule reliability continues to struggle. The number of vessel arrivals subject to extreme delays of more than 7 days on the Asia-North Europe trade lane was 461 in January to May 2021, of which 134 were more than 14 days late, and 30 were more than 21 days late.
With ripple effects from the Suez incident earlier this year, port closures across China, and demand that drastically exceeds supply, there hasn’t been an opportunity for the industry to catch its breath.
"Reliability is down more than 38% from nearly 80% just a year ago"- Sea Intelligence
There is no relief from the elevated freight rates. Shippers cannot afford to wait to book. The earlier will always be better as rates are not forecasted to drop anytime soon. 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.
Ocean: Every month brings new record highs across ocean freight rates.
Road: Driver shortage on European road freight and new surcharges are driving up spot prices.
Air: Whilst air freight costs are at the highest compared YOY, we are seeing much more stability on rates here.
It’s time for FCL shippers to consider switching to LCL movements. Before March 2020, shippers were looking at approximate costs of $900 per TEU but now these figures are much closer to £9,000 per TEU. It’s not sustainable for shippers and traders to continue coughing up these soaring rates with no reassurances that their goods will even move.
By considering LCL shipping, or less-than-container-load, you can shipless, more often. Lowering initial outlay on high freight costs and allowing you to keep your products in stock when your competitors are struggling to maintain inventory. As a leading consolidator, Unsworth have guaranteed space for our weekly consolidated loads, meaning fewer missed deadlines.
Ask our team now how we can help your China to UK import movements today. Because it’s our box and we’re not co-loading, we can offer more control, more ownership and more visibility. Enquire today if you want to get your goods flowing again.
The first thing to consider is one of the simplest solutions. Optimise your movements. We can help ensure you are moving goods effectively. From switching some of our clients from full container loads to less-than-container-loads, we've been able to ensure at least some stock is on the move. There have been many factors posing risk to freight movements across all modes, and having hundreds or thousands of your stock on the move at once can create a flurry of problems should any issue arise.
As usual, we strongly encourage our clients to utilise our technology driven platform, Pathway. Shipment visibility has never been more important than it is today and having access to a free tool that provides shippers with instant access to key cargo information and container analytics at the click of a button is vital. Having this type of visibility will create adaptability. There’s no predicting when we’ll gain a sense of ‘back to normal,’ and with the approaching peak season, it will be a while before we come out of this backlog.
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. 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.