27th October 2020
Given the current market conditions – our latest advisory is more extensive than previous, covering the following salient points/ headings;
- General Market Overview
- Rate & Operational Issues
- Equipment Shortages
- Port Congestion
- Port Closures
- UK Imports/ Arrivals (Carriers Evasive Action)
- Vessel Schedules
- UK Haulage (Booking Process)
Asia – Europe Trade / General Market Overview
The three major carrier alliances on the Asia to North Europe trade (2M / Ocean Alliance / THE Alliance) have all reported heavier than expected bookings following the Golden Week holidays. All three Alliances removed further capacity in October, yet demand continues to be extremely strong from China/ South East Asia countries, and carriers have struggled to clear backlogs of containers, in particular from the transhipment hubs. The continued volumes and forward forecast remain strong for November & December. The trend of full ships has continued since early May, with the demand bringing about capacity problems with all the major carriers. Just for September alone, volumes for the Asia–Europe trade are up some 7% compared to the same month last year. Demand is currently (and has constantly since May) exceeded the capacity available with the carriers.
Rate Levels / Operational Issues
Freight rates in correlation to the space situation are continuing to increase, either directly or as a consequence of Peak Season Surcharge (PSS) being applied. The Peak Season Surcharge was implemented at the start of October (some prior) and it would have been a fair assumption at that point to project its removal after Golden Week, however that has not been the case. Not only have we been told it will remain in place possibly through to December, but we are also receiving notifications of it increasing further for November sailings.
Shortages of Container Equipment
The high number of cancelled vessels in Q2 along with the surge of cargo in Q3 & Q4 has left carriers with a huge problem of empty containers not being in the right place at the right time. This is now greatly affecting China, South East Asia and the Indian sub-continent, with all carriers experiencing sudden shortages of equipment. In fact, some key ports of loading are now reporting that they have almost run out (if not already) of equipment, in particular 40ft or 40ft High Cube containers. This situation is one of the fundamentals of the application of the PSS, by way of supporting the repositioning/ repatriation of equipment. This has also led to some carriers controlling the release of equipment in China with pick-up only allowed around 7 days prior to vessel sailing.
The shortage of containers is an industry-wide problem which is affecting ALL carriers, and this is now expected to continue into 2021 (before the imbalance is corrected). It is suggested that all importers should factor in a minimum of an additional 2 weeks to their shipping lead times.
Port Congestion Issues
With many of the world’s ports trying to recover from the impact of the pandemic, some are facing more acute problems than others.
After facing the loss of volume and revenue at the peak of the crisis, they are now seeing a resurgence of demand but often with a lack of staffing, equipment or training. The increased demands and deep clean arrangements after shift changes in Port Carnes and Lifting equipment once or twice a day is losing valuable hours for the port operations. Some ports are faring better than others, but we are seeing the most serious challenges in the main China ports of Shanghai, Ningbo and Yantian, as well as in the UK main ports of Felixstowe, Southampton and London Gateway.
The port of Felixstowe is facing severe criticism from the industry due to current delays in berthing vessels and turning around business. The British International Freight Association (BIFA) recently said “ BIFA members have suffered from two years of poor service from the port, and we feel that there is a need for independent intervention by government to address the many issues faced by the port users”. We are currently seeing that a group of carriers is now taking a dim view on Felixstowe performance. This includes several carriers that have diverted ships to alternative ports and some who are more generally looking at their longer-term commitment to the port and looking to reduce their overall volumes. Some carriers already announced a surcharge of USD 150 per TEU for anything shipped to or from the port, with others expected to follow.
We are working with our carriers and the port to manage the challenges, but like all other service providers we are very much in the hands of the port when it comes to the final mile of getting a container off of a ship or picked up with our transport. With these continued issues at the Port of Felixstowe many have looked to other UK ports as an alternative solution/ option. However, within the last few days (with the increase in diverted Volumes) it is now reported that Southampton is now (if not already) reaching its full capacity / suffering from congestion.
To that end carriers are now also looking to apply a Port Congestion Surcharge ‘at’ Southampton at / around the same levels to that being applied at Felixstowe, effective from the 1st November. We may now also start to see a similar situation (Congestion Surcharges) being applied to other UK Ports as well as the Continent, where these too are also now suffering.
Latest News / Port Closures
Announced only yesterday evening (22nd October); we have been advised that several carriers have suspended the return of empty containers to the Port of Felixstowe by both road and rail, effective from the 26th October. Furthermore, as of tomorrow (23rd October) the shipping line CMA will not accept the empty return of containers at London Gateway Port – as well as COSCON at both London Gateway ‘and’ Southampton Port. We are collating further information here and will update on this as soon as possible.
UK Imports/ Arrivals (Carrier Evasive Action)
As a consequence of the high import volumes into the UK versus the inability of empty container evacuation/ repatriation, Carriers from the Ocean Alliance have taken decisive/ immediate action to temporarily suspend bookings/ reduce their UK imports by some 60%. It is expected that the other consortiums could soon follow suit here, the knock-on efforts being self-evident.
Erratic Vessel Schedules
Without doubt our UK ports are not helped by some of the issues now being faced by the ports in the origins from where the shipment originated. Congestion, Weather and Covid-19 related issues are causing delays at many origin ports that see vessels sailing several days later than planned. Despite of the efforts of some of the carriers to build in some slack for slippage it reaches the point where small delays knock-on to larger delays at later ports and eventually an ETA at the final port of discharge cannot be achieved.
In some circumstances this can cause a vessel schedule to be delayed for a full week, due to no free berthing space available at the port and the only option being to take the next week slot for the string of vessels in question.
This problem is affecting all UK ports at present, as the greater volumes and less reliable vessels are causing delays that cannot be recovered during these difficult times.
Transport Booking Process
Very similar to 2018, this year is a challenging one for the transport industry with many factors impacting service levels. Back in February/March 2020, a time none of us could have possibly imagined working through, all of us took decisions to protect our business. Orders were cancelled, bookings diminished and as an industry we were forced to react. Hauliers furloughed drivers and retired old vehicles.
Haulage fleets are not back at the same levels as last year. Not all EU Drivers have returned from the reduction in capacity earlier in the year, older vehicles were off-loaded and not replaced. No doubt, some drivers found different work. Suddenly we are in peak, volumes are pushing/ exceeding that of 2019, as we all try to recover our positions for this year. Even though EV CARGO GLOBAL FORWARDING currently has more haulage contracted to us than previously, there is a finite number of vehicles and a finite number of VBS bookings to collect cargo.
Bad weather can obliterate delivery schedules, giving our teams an incredible number of bookings to recover, when we are already at full capacity.
Turnaround times seem to range between 2 -5 hours for collections from UK Ports. This can result in failures or last-minute delivery amendments/cancellations.
Some examples of why delivery amendments/cancellations occur are as follows: –
- Vessels delayed or diverting at the last minute
- Increase demand
- Lower capacity from COVID working practices at UK Ports
- Less drivers and traction available
- Less VBS slots
- Longer discharge time on larger vessels
- Ports not loading containers on the train
When we have any changes or failures due to the above, we must put these deliveries back into an already heavily congested transport system, which can result in the next availability for transport being 7+ days from previous booking date. We would kindly ask as a temporary measure, flexibility from the receiving warehouse if we run late, to avoid a new booking being required. EV CARGO GLOBAL FORWARDING will continue to pre-book haulage ahead of vessel arrival, however to try and counter the above we recommend that road deliveries are booked 5 working days from ETA and rail deliveries are booked 6 working days from ETA, this process will greatly help mitigate rebooking amendments and cancellations.
We do appreciate there will be occasions for urgent ‘hot boxes’ to be treated as an exception where possible, please do advise your Customer Service teams if this is the case and they will do all they can to book these containers in earlier. To support, there will be flexibility from EV CARGO GLOBAL FORWARDING on demurrage by extending the free time of the additional day if required, this only applies when booked and shipped with EV CARGO GLOBAL FORWARDING. We are conscious that when a container is booked, planning would’ve gone into the container arriving on the day it is first booked to send goods back out again.
Any delay has a big impact for all involved, by adding an additional day for booking, it gives the delivery the best opportunity of being achieved, without the worry of you incurring additional demurrage costs, due to the flexibility we can provide on demurrage.
To give you an idea on the availability of booking haulage with the shipping lines, we are seeing around 14 days and beyond after vessel arrival where we can get a booking from them.
Our Customer Service teams have already been working on this process with many of you and we have seen reductions for both parties in the additional work required to manage amended bookings.
We very much appreciate that the above does not paint a good picture/ outlook for the coming days/ weeks ahead. However, and whilst much of this is already being publicised / announced in the press & various trade publications, we feel it vitally important that we keep you updated/ abreast of the market situation. The conditions remain extremely challenging and EV CARGO GLOBAL FORWARDING is doing everything possible to mitigate any delays to your shipments, using all means available.