factory emissions

China factories closed by power cuts

Oct 7, 2021 | ,

The Chinese government has implemented strict controls on the use of electricity that will seriously affect production in factories across ten critical provinces and could see US$120 billion of trade flows delayed.

With severe disruption throughout the supply chain from China, this adds a new headache for manufacturers of products that are being exported globally and puts further pressure and stresses on the logistics platforms as the production of goods inevitably are impacted and delayed.

Many parts of north-eastern China are experiencing power rationing and cuts because of coal shortages and the tightening of emissions standards, affecting heavy industry and manufacturers, with many closing temporarily.

The regulations have been implemented in more than 10 provinces and followed China’s National Development and Reform Commission, releasing a plan to restrict energy-intensive activities and consumption in line with President Xi Jinping’s 2030 target for carbon emissions and to achieve carbon-neutrality by 2060.

Some of China’s key ports, including Ningbo, Guangzhou, Yantian and Shekou, are located within affected provinces, while Shanghai and Ningbo process many container exports from Jiangsu province.

Integrated Circuit Boards are the most impacted commodity at US$1.5 billion which will affect manufacturers and consumers, as the world continues to reel from a global circuit chip shortage.

In addition, the power shortage has already affected the provinces of Jiangsu, Guangdong and Zhejiang which has seen factories producing steel products, plastics, home appliances, chemicals and textiles shut down or move to a three-day week. Many of the factories in these provinces produce steel products, plastics, home appliances, chemicals and textiles.

Telephone equipment (US$1.3 billion) and clothing (US$635 million) are other key commodities that will be impacted if the disruption continues for more than a month, which will therefore affect many companies rushing to ensure they are stocked up with key products for the holiday season.

It’s unclear how long rationing and cuts will be in place, so it is not possible to predict the outlook. In the short-term, it is certain there will be an impact on factory production and this will surely affect container shipment volumes.

In the longer term, will this supply chain ‘shock’, persuade firms that, given the exceedingly high cost of shipping from China, they need to consider moving production to other centres in Asia or the Indian subcontinent. Or even near-shoring, with manufacturers in Turkey and Portugal, among those welcoming an avalanche of new enquiries.

Supply chains are likely to be under further pressure with these developments and while we expect the situation in these regions and surrounding ports will improve, as power is restored, this may take a little time dependent on the next steps followed by the China authorities. We have already seen customers goods delayed and ex-factory timetables adjusted due to the power outages. We recommend and encourage that you check with all of your Chinese vendors to see if they have been affected and whether there will be delays to product desptach.

We will be assessing the situation’s impact on a shipment by shipment basis, which is why we recommend that you give us your shipping forecasts and bookings, as far ahead as possible.

Our supply chain management platform, MVT, provides end-to-end visibility across your supply network, to expedite priority orders and defer those less urgent. It is simple to monitor and add new vendors. Pro-actively managing them, so you can diversify your supplier base.

Please do not hesitate to contact us with any questions you may have and we will continue to share the most important developments, so that you are informed, to make the decisions that matter. 

Coronavirus highlights need for visibility

Why some supply chains fail in the current environment

Oct 7, 2021 | ,

Brexit and the COVID pandemic has put global supply chains, and the people who work in them, into the public consciousness for probably the first time. As disruptions impact supplies of consumer goods, leaving empty shelves and fears grow for Christmas stock availability, people are asking ‘what’s gone wrong’.

Supply chains almost never operate perfectly. There’s too many processes, participants and ‘spinning plates’, to throw a spanner in the works. The reality is supply chains have  always had issues, but freight forwarders put them right and because the thing consumers wanted always turned up, no one was really paying attention. That is part of the value we have traditionally added to the global movement of your products – making issues logistics invisible so that you can get on with your own core business functions.

Weather, economics, capacity, pricing, labour disputes, strikes, regulatory changes and accidents are just some of the issues impacting trade and overcoming them is part of managing cargo flows for forwarder and supply chain executives. But the pandemic and its after-effects are much more profound. Why is that?

The simple answer is that the sudden, unexpected and massive surge of demand that followed the lifting of lockdowns, far exceeds the market’s capacity and ability to cope with the consequences. Supply versus demand dynamics were, and continue, to not be matched.

The existing global supply chain infrastructure simply can’t handle the volume of products flowing through the economy, as consumer demand shifted from purchasing services to purchasing physical products.

For another insight on this critical subject we recommend you view this excellent report on ‘Global supply disruption’ by the BBC journalist Ros Atkins - WATCH VIDEO – it gives a simple but comprehensive overview of what has and is happening in The UK and globally within the logistics arena.

With inventory limited, by domestic and global production shut downs, businesses pushed hard for more stock, as production came back online.

Suppliers across Asia, starting in China, ramped up manufacturing and products started to flow again and the volumes were much bigger than before. Many of them PPE related and totally unplanned as governments bought stock in the early phases of the Covid pandemic.

Before long, with all the passenger aircraft grounded, the shipping lines were employing all their fleets and every container ship that could be bought or hired was put to work moving cargo across the oceans.

However, ports were built to handle relatively consistent volumes and each port is constrained by the number of cranes that can service ships and the available space to store containers.

When the ports became flooded with cargo, they simply didn’t have the capacity to handle it and the lack of labour, trucks, storage capacity and rail infrastructure all started to create significant supply chain challenges as congestion worsened. 

Once a cargo shipment reaches the arrival port, it may go from truck to rail to warehouse to truck to distribution centre and any number of sorting facilities before it reaches a store or eCommerce customer. Many of the capacity constraints have been labour-related, i.e. COVID-safe working restricts port worker volumes, quarantine means under strength shifts at the distribution centres or simply not enough HGV drivers. Some of these issues are taking time to resolve, or may never be resolved.

Will the supply chain issues end soon? Very unlikely

Even if we can resolve bottlenecks, congestion and disruption to meet the current demand on the oceans, at the ports and in the trucks, any further significant increase in demand could undo any progress.

Businesses that don’t soon have enough inventory on hand are going to sell out prior to Christmas because lead times are so extended. We may see, after Lunar New Year, a very strong focus on inventory replenishment and with inventory-to-sales ratios so low, restocking may continue through the second quarter into the summertime and maybe all the way up to the peak season next year.

So, even if demand for services returns, we have a long way to go before the market catches up with anticipated demand. New vessel orders will not start to arrive until next year and will not add any significant volume before 2023-24 and, likewise, any infrastructure investments by ports or other participants, will take 12-36 months to plan and execute. 

It is anticipated and widely accepted that the issues we see currently within the logistics sector and the high freight rates across all modes will continue next year without much compromise until the second half - hopefully.

Managing supply chains can no longer be a back-office function, largely ignored and taken for granted. More than ever, business survival will require a highly functioning supply chain run by professionals with the experience and critical support of partners. 

Metro will always provide you with the alternatives and options available in the current market surrounded by proactive value added services, technology, communication and an overall solution throughout your own supply chains that is designed and created on a bespoke basis. 

We encourage engagement and a collaborative partnership approach with all of our customers, and suppliers for that matter. For further information and to discuss your ongoing requirements please contact Elliot Carlile or Grant Liddell and let us visit you and demonstrate what we do and how we do it…….

Montreal

Container sea freight carrier reliability drops to an historical all-time low

Oct 7, 2021 | ,

Despite continuing global demand and freight rates breaking all records, vessel schedule reliability hit an all-time low in August and now ports have begun to turn away empty containers, due to the build-up of equipment that is delayed in its removal as a consequence.

Although schedule reliability has hovered between 35%-40% for most of the year, on the main ocean trade lanes, it dropped to 33.6% in August which, according to Sea-Intelligence data, is an all-time low for the 10 years it has tracked global schedule reliability.

Maersk, the best performing big carrier, is planning port omissions to improve schedule reliability, which are almost certain to include UK ports. This will create even greater delays for importers as containers destined for the UK are unloaded in ports on the Continent and require being feedered back to the final destination. Yet we hear today that Felixstowe is refusing to accept Maersk, Evergreen and CMA empties, as they have exceeded storage limits. (NOTE - We are taking immediate action to mitigate impact on our customers. See below.)

On an annualised basis, global reliability in August 2021 was -30.1% lower than August 2020, which continues the astonishing trend of yearly declines of over -30.0% in each month in 2021 so far. Bear in mind this is the global average considering all trades and there will be an even greater impact on specific shipping lanes. In addition this measure is only based on the quay to quay sector of a container movement and does not include further impact at origin or destination. If it was possible to assess and quantify the door to door comparison it is likely that 90%+ of movements have been lengthened since the pre-pandemic transit levels.

The schedule reliability decline is being shown most starkly on the Transpacific trade where performance has dropped to a staggering 9.9% (with the three alliances only averaging between 3.4% and 7.8%) the first time any of the 34 trade lanes has dropped below 10% since measurements were started 10 years ago.

The physical number of vessels deployed on liner services is a contributing factor in port congestion and the ensuing impact on schedules, with NAWC moving from an average of 1.9 vessels per week in 2019, to 5 in 202 and spiking further in 2021.

On Asia-North Europe, under normal circumstances, very few extra vessels are deployed and the initial impact of the pandemic was muted. This started to increase in 2021 and worsened due to the Suez Canal blockage, which has left ports handling more vessels than they are used to, which in turn adds to the bottleneck problems.

Unsurprisingly the average delay for late vessel arrivals also continued to deteriorate, increasing monthly by half a day to 7.57 days in August.

Maersk Line, was the most reliable top-14 carrier in August 2021, with schedule reliability of 45.6%, followed by Hamburg Süd with 38.0%. Another three carriers had schedule reliability between 30%-40%, with only three carriers recording schedule reliability of 20%-30%.

Six carriers had schedule reliability of under 20%, with Evergreen recording the lowest August 2021 schedule reliability of just 11.5%. Only HMM recorded a M/M improvement in schedule reliability, of  1.6%, while no carrier recorded a Y/Y improvement, with the smallest Y/Y decline of -24.2% recorded by Maersk Line.

To improve schedule reliability Maersk has announced its plan to adjust vessel voyage numbers on Asia-North Europe services to match the corresponding actual weeks of departure. Blaming strong demand and network disruptions for hammering their schedule reliability.

Maersk is reducing the number of port calls to improve reliability and suggest that customers will want to plan their supply chains well ahead, particularly for the upcoming peaks.

China’s October Golden Week, Christmas and Chinese New Year will drive strong demand for container shipping for the last quarter of 2021, but port congestion, especially in Asia and Europe, and service delays are expected to put even more pressure on service schedules.

It is estimated with the delays and lengthening of the transits in the supply chain this is causing the equivalent of 10-25% reduction in container capacity and equipment availability with boxes being in the wrong place at the wrong time and unable to be utilised. In addition the impact on ports in creating congestion and the consequences of vessels arriving in bunches (as has been widely reported on the west coast of the USA) this creates further delays on arrival at destination, further diminishing reliability and the conveyance of products to market.

With network utilisation likely to remain above 95% for the largest carriers, due to current high demand and the virtual withdrawal of supply, with the extended shipping times, it is likely that the lines will implement extra loaders and ad hoc port omissions to help them improve reliability.

Repositioning empty equipment is critical, and as boxes remain in Europe, USA and other regions the severity of container shortages increases across Asia, which the lines have used to justify recent reductions in arrival free time and increases in storage fees.

The decision by the Port of Felixstowe to reduce empties is profoundly disturbing and while the lines are offering alternative restitution depots, these will all likely incur additional cost.

Our transport team has arranged some short term solutions to protect our customers, but clearly the situation will delay import activity, lead to build-up of empties inland and deteriorate, if it continues into next week.

We negotiate rate and volume agreements across all three alliances, so that we can access the biggest range of schedule reliability, service offerings and rates.

container haulage

Liner haulage is effectively broken

Sep 29, 2021 | , ,

Multiple issues are negatively impacting container haulage operations from ports across the UK, with inevitable financial and service impacts, which are likely to impact every importer of full containers. In the worst cases, if no action is taken, importers may face very significant additional charges, with no guarantee of delivery.

Full load importers are facing unprecedented challenges, and while these are great, we believe they can be overcome and mitigated to some extent by taking the proactive actions we describe below.

The loss of HGV drivers to roles outside the freight sector has removed swathes of capacity from the container haulage sector, which is already struggling to deal with inefficient port operations and the lowest vessel schedule reliability in history.

Carrier (liner) haulage is usually a cost-effective option, as it does not not attract a load-on load-off (LoLo) charge. However, the current market situation, haulier cancellations, delays with deliveries and collections and the challenge of matching resource with unpredictable vessel schedules, means that 30% to 40% of haulage moves are failing and shipping lines have very few – if any – bookings until the middle of October or later in November.

Despite the lines extending their haulage booking time from one week to over a month, they are not waiving port storage and demurrage charges, which will be charged in full at each carrier’s tariff and means shippers will be liable to these charges at £75-£95 per day for a 40’ container, which can escalate to £150-£175 a day.

For the 30-40% of failed delivery bookings, some lines are providing additional free time, of between four and seven days, but OOCL and Cosco will offer no additional free time, while Maersk will offer free time up to the point of re-booking.

Merchant haulage may attract additional costs of £150-£300 per container, to ensure we can attract haulage at short notice and absorb the LoLo costs, but it does offer the opportunity to avoid storage and demurrage charges and it is a more flexible alternative, which is particularly critical given the increasing incidences of carrier and merchant transport bookings being cancelled, often without notice, for more lucrative jobs. 

We are leveraging every haulier relationship and partnership, to help our shippers and would recommend flexibility on delivery windows, with bookings for afternoon collections and deliveries more likely to succeed. 

Regular delivery forecasts mean that we can book delivery slots in advance of vessel arrivals, which increases the possibility of achieving container deliveries in line with your expectations.. However if vessels arrive off schedule, late or bypass the UK altogether, then this will create further impact and issues regardless of slots - containers have to be landed to be delivered.

With post-COVID demand and associated supply chain disruption continuing, we anticipate this issue will continue for the rest of the year and are consequently implementing alternative solutions to traditional container haulage:

 - Unloading containers at ports/ railheads for delivery in standard commercial vehicle

 - Dedicated delivery/collection slots with contract vehicles and regular drivers

 - Swap and containers 

Switching your transport requirements away from the carrier option to alternatives, with immediate effect, is the only way to mitigate rent and demurrage charges

We receive no benefit or reduction from carrier support on additional port charges that will be applied as a result of the failure of their arranged transport. Swift action and agreement on costs is required.

Please contact your account manager, operations handler or any of the Metro team to discus your situation, the solutions we have outlined and the cost implications, so we can agree immediate actions and timelines going forward.

Thanks for reading this advisory – it is not what we want to be reporting, but it is the best guidance we can offer in the circumstances. 

We will continue to update you regularly, as the situation changes, and hopefully improves.

Category: Supply Chain

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