Asia ocean turmoil, a 'perfect storm'

Date Added: 8 January 2021

The global pandemic has hit ocean shipping in the UK with great severity. The critical situation and chaos we are now all facing in the UK shipping industry is due to a 'perfect storm' of events that have collectively created market conditions never previously witnessed.

The Port of Felixstowe (the largest UK container port) reported scaling down its staffing levels immediately after the pandemic took hold in early 2020 as volumes fell ex Asia, with a number of staff at the port being made redundant. Safety measures required at the port due to Covid-19 resulted in a significant reduction in working capacity, slowing down port operations.

As Asia returned to near normal production levels the UK saw a surge in ocean volumes of both PPE products and general FAK goods, further exacerbated by the dramatic reduction in airfreight capacity, leading to a large volume of import containers requiring offloading from vessels calling at Felixstowe.  Due to the additional influx and slow down of port operations, a significantly lower than anticipated number of empty containers were reloaded back on vessels, as export ‘loaded’ containers took priority.

The situation became ever more critical as schedule reliability reduced and berthing slots became shorter, thus the volume of empty containers at Felixstowe reached such cataclysmic levels that on a number of occasions the port of Felixstowe refused to allow empty containers to be returned to the port. These events at Felixstowe caused many shipping lines to request importers to switch to Southampton port, but this action subsequently caused severe empty congestion at Southampton port too.

The imbalance of UK import volumes versus exports has always been a concern for shipping lines. Prior to Covid-19, the average repositioning costs of UK import containers were one of the highest in Europe.  With significant numbers of empty containers stuck at UK ports and container yards causing a shortage of container equipment at origin (this is not an issue unique to the UK), carriers made the decision to cut the capacity for the UK market, some by up to 30%, in favour of serving more lucrative routes such as Asia / USA.

As a consequence to these events, the carriers are now using these market conditions to not only control space / equipment made available to the UK market, but dramatically increase freight rates too. In October, market rates for Asia to UK were in the region of USD1,900 per 40’ container, now they are USD13,000 and above, yet still without the guarantee of equipment or space.

The initial downturn in volumes due to the pandemic impacted UK haulage companies and with future volume trends remaining uncertain they are not able / willing to increase their capacity. Schedule reliability of vessels is at its worst recorded levels, resulting in UK container haulage being booked and subsequently cancelled as container / vessel arrival dates change on a near weekly and sometimes daily basis.

Many vessels are being diverted to other European ports (call for the UK omitted) for containers to be subsequently arranged via feeder vessel and arriving into the UK a week or more later.

At present, the shortage of space / equipment and week on week freight rate increases from carriers continues unrelented. We are yet to see any sign of an improvement in market conditions and don’t anticipate this possibility until after the Chinese New Year at the earliest.

The combined events and extreme market conditions could not have been envisaged and are being faced by everyone in the industry.  We are extremely frustrated (as we know you will be) that we are now at a point for which all carriers are demanding the highest rate levels on record, but with services that are unreliable in terms of space / equipment and schedule reliability and we sincerely hope this situation is rectified as quickly as possible for everyone’s joint benefit, as the current operating environment is not sustainable.

Davies Turner is working tirelessly along with our partners to endeavour to offer our existing clients all space / equipment options available to us through our many channels in an attempt to mitigate delays and ensure a continued supply of goods.  However, we are aware it is impossible to mitigate all potential delays and avoid the rate levels required to gain container departures.





 

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