Logistics providers and business leaders continue to observe what would previously have been considered extraordinary circumstances now firmly embedded across the global supply chain.
The stunning levels of congestion at the Port of Los Angeles is just one issue the supply chain is grappling with. We are currently seeing a major global development with the blockage of the Suez Canal, across the pond there are the early effects of Brexit, and there is no post-Chinese New Year easing of container shortages expected. The incoming relief stimulus package in America looks set to trigger another surge in e-commerce shipping as the Perpetual Peak Season continues.
Below we take a closer look at some key elements in the current scenario, with input from a number of our experts both in America and overseas.
PORT OF LA PACKED AS CONGESTION CONTINUES
As data from global shipping Marine Traffic illustrates, the number of shipping containers and the volume of contents currently anchored off the Port of Los Angeles is unlike anything we have ever seen. It is not just limited to the Port of LA and Long Beach either, this is a common story worldwide.
Credit: Freightwaves
As our Chief Growth Officer, Brian Bourke, recently told CNBC, some clients are bearing the brunt of extra cost to save transportation time and meet customer demand, saying, “If you want to ship a hot tub via ocean from Shanghai to New York, that will cost you around $1,000 for the transportation for a lighter hot tub, but it will take a minimum of 35 to 40 days”.
He added that another seven to 14 days needs to be factored in if you need to book in advance, and that this has significantly impacted airfreight costs. However, some companies are willing to take the hit: “[Airfreight] will only take you three or four days to get your hot tub. So, paying two or three times will save you four to seven weeks right now. Ultimately, the math makes sense for certain shippers right now.”
The point was emphasized by Shawn Richard, SEKO’s Vice President of Global Airfreight: “Barbecue equipment and associated good such as lawn or patio furniture, inflatable pools, filter equipment, and everything that could be used to improve the shelter-at-home experience in lieu of family vacations are now moving by air.”
SUEZ BLOCKAGE ADDS TO SUPPLY CHAIN CONCERNS
The development this week of the Ever Given shipping container running aground and blocking the Suez Canal will provide another substantial challenge. The 400-meter-long, 59-meter-wide vessel is carrying a total tonnage of 224,000 tons and was knocked off course by strong winds, becoming lodged sideways across one of world’s busiest trade routes.
Around 12% of global trade volume passes through the Suez, the equivalent of around 50 ships per day, with the blockage now causing a traffic jams each way on the route between the Mediterranean and the Red Sea.
Although traffic is currently being diverted to one of the canal’s older channels to ease tailbacks, it may take several days to move the Ever Given. This will doubtless cause a knock-on effect that could have major ramifications for global trade.
NO RESPITE PRE- OR POST-CHINESE NEW YEAR
The usual industry lull through Chinese New Year to allow carriers to re-position a huge volume of empty containers in Asia has not provided its traditional respite. It had been hoped that the two-week period might provide a chance to ease pressure on supply chains, but as SEKO’s Vice President of Global Carrier Management & Ocean Strategy, Akhil Nair, informed Loadstar, these hopes were short-lived.
“There was a reasonable amount of equipment repositioned during Chinese New Year, but we expect that all to be utilised by week four of March, or early April,” said Nair. “We seem to have entered a cycle of perpetual scarcity.”
He added that demand is now outstripping supply once again, saying: “In south and central China there are signs of container shortages reappearing – and even if cargo flows improve, there are other factors that could limit availability at origin”. Once such factor is the imminent COVID stimulus package in the US, which we address in the next section.
STIMULUS RELIEF PACKAGE COULD INSTIGATE E-COMMERCE SURGE
In March of last year, once the CARES Act was passed, parcel volumes consistently increased through the rest of March and into April. As Rick Lee, SEKO’s Chief Operating Officer for North America, recently informed Modern Shipper: “The last time stimulus came out, the e-commerce orders doubled in days. People may use this money to buy something for themselves. And then [in March 2020] it was a smaller stimulus. Now, with a parge potential stimulus coming, our orders will surge within days.”
In a separate interview with American Shipper, Lee added: “Our warehouses are working around the clock, and we are looking to add robotics as a supplement to the human component since shifts and social-distancing measures have been changed to protect our workers against COVID.”
Akhil Nair also alluded to this same subject in the Loadstar piece referenced earlier, saying: “Let’s stay, optimistically, that Long Beach gets better and they clear the backlog, and carriers are able to reposition all these empties from the US, should the second COVID stimulus be passed and checks are sent out to consumers, they are likely to spend it on goods similar to their spending patterns in the first package.”
BREXIT BORDER DISRUPTION COMPOUNDS SUPPLY CHAIN ISSUES
Since Brexit on January 1, it has been well-publicised that complex paperwork and increased red tape has led to substantial delays, mainly on goods being exported from the UK to the EU.
Customs clearance procedures and inspection requirements are leading to around one in five consignments being sidelined due to a lack of proper declarations and paperwork. This disruption has led to extreme measures from some companies, such as a recent case of plants being shipped from Ireland to North Wales taking a 1,400 mile round trip through existing trade routes in France, Holland and then England to avoid hold-ups at Holyhead port!
The trade deal which was struck on Christmas Eve has avoided even worse circumstances, but the ‘paper borders’ which have been created are adding further issues in a global supply chain already stretched close to its limits.
Whilst these are extreme circumstances, we are doing everything to mitigate the impact felt by our clients. If you have any concerns or questions, please contact us directly. We are also continuously updating information on our Knowledge Hub, Brexit Hub and COVID-19 advisory section.
