Pressures in Sea Freight Market Continue

Pressures in Sea Freight Market Continue
April 1, 2021 Hannah Marshallsay
pressures in sea freight market continue

Container shipments from Asia and the Indian Sub Continent to the UK and Europe continue to be volatile. Container shortages and congestion are still challenging schedule integrity.

Shipment backlogs, port congestion and container equipment shortages have caused chaos on sea freight routes since the end of 2020, driving freight rates to historical highs on shipping lanes across the world. It was hoped that the usually quieter, post Chinese New Year period, might present the opportunity for carriers to redress the imbalances in the supply chain. However the situation has only, at best, plateaued. With thousands of backlogged containers waiting to be shipped at Origin, volumes have remained high, and as such capacity issues have persisted. Along with ongoing port congestion, equipment challenges and the recent blockage of the Suez Canal, we are seeing the same schedule integrity challenges we faced before Chinese New Year.

Ongoing Global Issues

The global boom in demand for goods out of China has continued, meaning there is still a shortage of containers where they need to be. There is still not a shipping lane across the world where carriers are no longer playing catch up.

Congestion issues are particularly acute on the Asia to US West Coast trade lane at this moment in time. There are significant knock on effects on the Asia to UK trade lane as a result, as all trade lanes are interconnected. The congestion experienced along the entire US West Coast port range has resulted in vessels being consistently delayed by as much as two weeks. This disruption is impacting Asia to Europe trade route schedules as we are experiencing a combination of late vessels into Asia, port calls being missed and vessels sliding by a week, all of which have a major knock on effect to the supply and demand imbalance.

We are continuing to see port congestion at many major ports across the world. We recently updated customers about significant congestion currently being experienced at the hub port of Colombo in Sri Lanka which is preventing the feeder network from working optimally and impacting shipments from the Indian SubContinent region, including Bangladesh. 

The situation at the key containers ports in the UK has been showing signs of improvement with slightly fewer UK-destined containers offloaded in mainland Europe due to congestion. Unfortunately we anticipate that there will be further UK port congestion resulting from the recent Suez Canal blockage incident.

Suez Blockage Impact

The recent blockage of the Suez Canal by a container ship that ran aground, has resulted in delays of shipments in the last week, but the full impact of the incident is still yet to be fully felt. It is expected to take at least 12 days to clear the backlog, and longer still for containers to arrive at destinations. We unfortunately anticipate disruption to schedules over a number of weeks as a result of this incident. There is likely to be further UK port congestion and inevitable delays resulting from the additional pressure put on the already constrained supply chain. 

Rates to Remain High

Freight prices remain extraordinarily high. Asia to Europe rates are still 5 times higher than this time last year. The intense competition for scarce vessel space and container equipment, means that prices are likely to stay high, even if demand reduces slightly in the coming months. The industry is still paying catching up and it could be some time yet until rates return to a more normal level.

Reports of Shortages in UK

The press have yet again been reporting that there will be shortages of supplies to the UK resulting from these challenges in the supply chain. The most recent headline to make the news is the shortage of garden furniture that is likely to be experienced by consumers this spring.

According to the BBC News, a combination of high demand and shipping problems is being blamed for the shortages. Some garden furniture businesses are reporting transportation cost increases of several thousands of pounds per container since the same period last year. Furniture giant Ikea is reported to be among the retailers experiencing supply issues.

Market Outlook

In the longer term we expect volumes to peak again as we move into the summer months. A lot will depend on the behaviour of consumers in the UK post-lockdown as to how the rest of the year will look.

Despite the ongoing challenges we would like to reassure our customers that we are working to limit the impact as much as possible. We will keep you updated of further developments as and when they happen.

We would like to thank all of our customers once again for their understanding during this challenging period. 

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