HKG port

The impact of the COVID pandemic on global logistics

Nov 10, 2021 | ,

The pandemic has underlined the critical importance of the global supply chain, in meeting critical PPE and medical needs, as well as satisfying consumer demand and the challenges in keeping goods moving efficiently along it.

The pandemic is creating new challenges for supply chains, as it keeps them working under unrelenting pressure, bringing to light previously unseen and unacknowledged vulnerabilities. 

The ability of ports and supporting infrastructure to work at full capacity has been undermined by staff shortages due to quarantines and COVID-safe work practices. 

The pandemic has accelerated and magnified problems that already existed in the supply chain, such as the pay and working conditions of critical workers, like HGV drivers.

Demand for vessel space and sea freight costs soared on every trade route as the grounded passenger aircraft fleet removed over 50% of air freight capacity at a stroke and to make a bad situation worse the amount of sea freight capacity available, was cut further due to containers and the vessels that carry them, being out of position.

Hopes remain that cost pressures will lessen, as consumer spending shifts from products back to holidays, eating out and other services. And while freight rates are very likely to remain higher than before the crisis, they will not remain at the current levels.

2020 - The COVID outbreak’s supply chain impact

  • Brexit seen as a major trauma to European logistics platforms.
  • The first quarter lockdown in China, prompted carriers to swiftly withdraw vessels.
  • As global lockdowns followed the carriers made further massive cuts to sea freight capacity.
  • The global passenger aircraft fleet is grounded, removing over 50% of belly-hold capacity.
  • Massive and unexpected demand for freight space returns mid-year as consumers buy products, as they are denied access to services.
  • Shipping lines start to return vessels, but they are now vastly off schedule.
  • Reacting to critical global PPE demand, airlines convert aircraft (Preighters) to carry cargo.
  • Ocean capacity is massively constrained, leading some lines to cancel longer term contracts and push shippers and importers to the FAK (Freight All Kind) spot market.
  • Ocean and air freight rates continue escalating to first quarter levels up >1000%.
  • Vessel schedules are even less reliable, adding to congestion at ports and extending transit times, which means empty containers are not returned to the areas of manufacture creating further delays.

2021 - Where we are now

  • Freight rates have remained firm, despite some expectation of them softening post-Chinese New Year and into early Q4.
  • Airlines have remained busy, even without passenger support and air cargo rates have increased significantly as their sole source of income.
  • Lockdowns affect manufacturing and lead times, with infrastructure congested.
  • Extended ocean transits and shortage of equipment effectively cuts capacity by 25%.
  • Reliability of carriers is totally lost with just 30% vessels on schedule and transits massively extended.
  • Global port congestion disrupts vessel arrivals and departures and handicaps the return of empty containers.
  • Inland road haulage and port-linked rail services in the UK, Europe and North America become congested .
  • Shortages of HGV drivers creates additional issues at destination and adds to congestion resulting in storage, detention and demurrage costs.
  • Airlines still operating predominantly on cargo income and pricing at record levels entering peak season.
  • Freight rates on all modes remain historically high, creating a ‘pay to play’ environment, with carriers focusing on the most profitable lanes and markets.
  • Power shortages and periodic power cuts in China, adds pressure in key manufacturing regions.

2022 - Looking to the future

  • As passenger travel opens up globally expectations would be for pricing to soften, as passenger income returns and belly-hold space adds to freight market capacity.
  • Many carriers are very bullish about 2022 and will not currently offer any form of pricing for 2022 contracts which will unwind over the final quarter.
  • Limited numbers of new-build vessels are scheduled to enter service before the end of 2022, so capacity is likely to remain restricted.
  • Inflation may soften consumer demand, reducing pressure on global logistics, in all stages of the supply chain, including manufacturing.
  • Carriers will continue pushing for longer term two year contracts and either decline to offer 12 month contracts, or refer customers to the FAK/spot market.
  • Confident shipping lines, eager to continue growing the ‘bottom line’ and airlines keen to recoup losses will maximise revenues from cargo movements.

In summary...

The pandemic-linked supply chain challenges described above, that have driven up prices and slowed the global economic recovery, will lessen over time. But any recovery will be fragile and easily undone by unforeseen events, like the shortage of HGV drivers in the UK and China’s drive for zero COVID cases. 

By 2023 (possibly late 2022) the COVID-19 situation should be under control and consumer demand steady, providing stability in global shipping, operations and costing.

The capacity of the global container fleet could potentially grow by 20%, as new vessels are delivered and schedule reliability will have returned, but how much tonnage the the 9 major shipping lines decide to withdraw or retire from the market, will dictate what volume, if any, is actually added.

Political and global events, not yet apparent, may have a huge influence on global supply chains, on all modes and in all regions of the world. 

Local and global issues are intertwined, due to the fragile state of ocean and air freight markets, demonstrating just how unpredictable the movement of your goods has become.

The shipping lines are expected to declare in excess of $150 BILLION pre-tax profits in the current financial year and it is unlikely they will want to give that up, considering what they have experienced and learned over the last 18 months on market dynamics and influences. They are in control of events and consequently their own success. 

It is widely accepted that the current supply chain challenges and high freight rates, across all modes, will continue into next year without much compromise.

Managing supply chains is no longer a back-office function, largely ignored and taken for granted, because business survival depends on a a high-functioning supply chain run by professionals with the experience and critical support of dependable partners. 

Metro will always provide you with the best alternatives and options, supported by a proactive team, leading-edge technology and open communication. Supply chain solutions that are designed around you, your situation and needs. 

For further information and to discuss your ongoing requirements please contact Elliot Carlile or Grant Liddell.

ECO globe 2021

Supporting environmental transparency

Nov 10, 2021 | , , , ,

Environmental reporting standards for business have been high on the agenda at the UN’s Climate Change Conference – COP26 – currently underway in Glasgow and Metro support the drive for businesses to be open about their impact on the planet, as transparency is an essential precursor for reaching global solutions to a global problem.

Companies’ response to climate change is arguably the most pressing issue facing society, which is why the UK government has joined 38 international partners to welcome the establishment of new international sustainability reporting standards at COP26. 

As a disclosing company, Metro is among the 13,000 corporations that have committed to environmental transparency, by disclosing our environmental impact and working to reduce greenhouse gas emissions, safeguard water resources and protect forests.

While world leaders gathered to discuss the future of climate change and their negotiating teams are hard at work at #COP26, we hope that our customers, and the wider industry, will also take action on climate change, because it poses a present and future risk to supply chains. 

It is only by measuring our environmental impact, that companies can understand and mitigate now, to prepare for the future and ultimately remain competitive – especially as there is increasing demand for goods, services and suppliers with a reduced environmental impact. 

Metro’s MVT Eco module monitors the energy emissions, emission costs and CO2 equivalent emissions, of each consignment we move, by every mode, which means that Metro customers can monitor the environmental impact of their supply chains and participate in offset projects that will eradicate their CO2 footprint.

The MVT ECO module is a cloud-based solution, that is available, free-of-charge, to all our shippers on their MVT dashboard, where they can view key eco statistics related to their movements, to see which areas will benefit most from emissions offsetting and where efforts can have the most impact.

To request a demo or discuss your requirements, please contact Simon George, who leads our technical solution team, or Claus Rasmussen to discuss carbon reduction strategies and the availability of offset projects.

VIEW MVT ECO WEB PAGE

container

Asia-Europe congestions adding to transit delays and schedule confusion

Nov 10, 2021 | ,

Congestion at both ends of the critical Asia-North Europe (this still includes the UK) shipping trade is wrecking vessel schedules, with the average delay of container ships completing a round-trip loop rising by over two weeks, as carriers skip congested ports at both ends, and quite often in between.

These extended transit time delays are removing much-needed capacity from the sea freight market, with analysts suggesting that the three alliances would need to add a further 44 ships of between 14,000 to 24,000 TEU to cover the delays and maintain a weekly sailing frequency on all 17 Asia-North Europe loops. 

In essence up to a quarter of total container shipping capacity has been removed, with the extended transit situation. The equivalent of parking up and idling 25% of the world’s global container shipping fleet to put it into perspective. Unbelievable a few years ago – but reality as of today.

Comparing the voyage durations for ships on the 17 Asia-North Europe loops arriving in Asia, for their next westbound sailing, during a week last month, shows that they needed up to 54 days additional time to complete a round trip, with delays averaging 18 days. This, therefore, affects both imports and exports – from and to everywhere – on the trade lanes between Europe and Asia. It is unavoidable not to.

Measuring the delays on a full round trip revealed the massive impact of port congestion on lines’ schedules, with an average of seven days’ delay for the OCEAN Alliance, 19 days for 2M, and 35 days for THE Alliance.

THE Alliance’s performance is particularly marked because it has not been skipping ports in Europe and trying to maintain its original rotation. But Rotterdam, Hamburg, and Antwerp have added significant delays because these ports were far more congested than smaller ports like Zeebrugge or Wilhelmshaven that are used by the OCEAN Alliance.

A significant and often overlooked factor in the operational stress that creates port congestion has been the excessive growth in call sizes over the past year and the sheer volume of containers that need to be loaded and discharged on a single vessel call.

While container ship volumes on the Asia-North Europe trade increased 11.3% year over year, this was just 2.8% above the 2019 total, but more vessels are also not a solution to the congestion. Due in part to the time between order, build and delivery of new vessels and in part because injecting more vessels would run the risk of simply compounding existing bottleneck problems. It’s a conundrum that is not easily solved.

Maersk warned, and other carriers followed, in an October market update that congestion would force them to join other carriers in implementing ad hoc port omissions, to try to maintain schedules, with extra loaders deployed to sweep up cargo and minimise the delays that customers are experiencing.

It does seem that decisions on port call omissions are not being communicated to freight booking desks and consequently, shippers are being offered space on sailings for which cargo may only arrive at the original destination port several weeks after the advertised date.

We have been offered space on MSC’s Shogun/Maersk’s AE1 sailing from China in early November, on the 19,224 TEU MSC Erica. MSC is advertising a transit time of 29 days to Felixstowe, while Maersk is quoting a transit time of 46 days for the same vessel.

We have seen similar errors from the Ocean Alliance and THE Alliance partners because their schedules have not been updated and it’s a major problem because shippers may make inventory calculations based on incorrect ETAs.

For the latest information and updates on your ocean freight planning and supply chain for the end of the year and 2022 please contact Chris Carlile or Grant Liddell for immediate advice and the latest intelligence relating to your global freight movements.

ISO tank

The challenge of shipping chemical cargo around the world

Nov 10, 2021 | ,

The challenges of finding tank containers and getting them booked for vessel loading at origin have been growing, making the transport of dangerous and complex goods more and more difficult.

Widespread disruption and delays in the global ocean supply chain have cut available transport capacity, with chemical cargoes that are typically dense weight and better suited to 20’ equipment, increasingly rejected by carriers in favour of cargo that is lighter and packed in 40’ containers, to offer greater yields.

Pretty much all nine leading container shipping lines have declined, at one time or another, to accept dangerous goods or requested such extraordinarily high rates, that it has been cost-prohibitive for the shipper.

The potential inability to move critical chemical products is of great concern, because these are specifically designed to support health care operations or water treatment facilities, and are contained in everyday goods that may be running critically low in certain parts of the country.

While there is no reluctance from our preferred ocean carriers to transport chemical products and dangerous goods, there are additional operational issues that need to be considered when handling that type of shipment and they are equally impacted by the challenges in the current market-driven by slow-moving supply chains.

With complex dangerous cargo, it would be inadvisable to leave it at the port terminal for an extended period ahead of departure and we need to make sure it is loaded as planned, which is more challenging because of the many omissions and ship delays.

Specific regulations around the transport of dangerous goods also add layers of complexity. The quantity and type of dangerous goods a ship can carry depends on the vessel’s Document of Compliance for Carriage of Dangerous Goods and restrictions may also apply at loading and discharge terminals, in addition to other local or international regulations.

A very significant issue over the past year has been the shortage of equipment in key origins, which has driven up the costs of shipping an ISO tank container by an average of six times, and up to a 30-fold increase at its worse.

The equipment imbalance is a huge problem, which is made worse by the HGV driver shortage because even if an ISO tank container can get on a ship in Asia when it lands in the UK, there is a major effort to ensure that there will be a driver there to pick it up.

For over thirty years we have been managing the safe and compliant storage, handling and transportation of chemical and petrochemical products to local, regional and international destinations.

Our ops team has extensive knowledge of the handling, packaging and compliant documentary requirements for the global multi-modal transport of hazardous and non-hazardous chemical products.

We work with twenty offices across Europe, Middle East, India, South East Asia, China, Japan and North America, to monitor market conditions and manage relationships with carriers, to ensure that our customers’ cargo is lifted and transported to the destination on time and in full.

Category: Supply Chain

Coronavirus | Sea | Supply Chain

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