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'Price rises likely' due to UK shipping problems

By Vivienne Nunis
Business reporter, BBC News

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  • Brexit
image copyrightGetty Images
image captionA container ship docked at Felixstowe port last month

Businesses say a global shipping crisis is causing freight costs to soar and UK consumers may soon see price rises for imported goods.

On top of skyrocketing shipping rates, carriers are adding congestion charges for imports to Felixstowe and Southampton, because of severe delays.

The logistics industry has written to the Department for Transport calling for it to help clear port backlogs.

One freight director said the UK's ports are currently "broken".

Global shipping schedules were initially disrupted during the early stages of the pandemic, but recently a surge in demand for imports and a backlog of empty shipping containers are causing bottlenecks at UK ports.

'Christmas, coronavirus and customs'

This week, two major cargo shipping companies, Maersk and MSC, said they were swapping Felixstowe port for Liverpool in order to "provide stability" to their transatlantic trade services.

Alex Veitch, boss of trade group Logistics UK, blamed the disruption on "the three C's".

"It's the Christmas rush, coronavirus, which is still causing supply chain disruption, and now customs - or the uncertainty around it, with businesses taking the decision to move goods in and out of the UK in case there is a no-deal Brexit," he told the BBC.

image copyrightAdam Russell
image captionHome appliance importer Adam Russell says it's "near impossible" to ship goods out of China

Adam Russell, who imports home appliances such as heaters and air conditioners for One Retail Group based in London, said the situation is "scary".

"We used to pay $2,000 to ship a 40-ft container to the UK, now we're paying at least $8,000 up to $10,000.

"Ultimately that means we're going to have to stop importing or we're going to have to pass that on to the consumer."

He said it's "near impossible" to get goods out of China now because fewer vessels than normal are sailing to the UK and there's also a shortage of empty containers ready to be filled in Chinese ports.

He's not the only one facing disruption:

  • Major shipping companies including Marseille-based CMA-CGM have told UK importers no more bookings can be made for ships sailing from Asia until the last week of December.
  • The Japanese carmaker Honda said delays at UK ports are holding up imports of parts and production will temporarily cease at its Swindon plant from Wednesday.
  • The Builders Merchants Federation has also complained of delays for building supplies such as screws and timber, crucial for building new homes.

Flexibility call

Organisations representing the UK's ports, shipping and logistics sectors have written to Transport Secretary Grant Shapps, urging the government to do what it can to improve the situation.

"We recognise government's capacity to step in is limited, but where they can, they should look at ways of increasing the capacity for moving containers on and off ports," said Tim Morris, chief executive of the UK Major Ports Group.

"That could mean running more and longer trains to and from ports, allowing hauliers more flexibility to collect containers out of normal hours, and for drivers to take on longer shifts where that can be done safely."

image copyrightOne Retail Group

The UK Chamber of Shipping said the shipping industry was not in crisis but acknowledged the backlogs, adding: "We are confident the resilience within the supply chain can cope with this disruption."

The letter to the Transport Secretary also warns of further potential disruption when the Brexit transition period ends on 31 December.

The Department for Transport said partners across government are working closely with the freight industry to resolve the challenges.

'Extremely stressful'

Logistics firms that are responsible for transporting goods from ports to warehouses say the situation is creating huge amounts of stress.

"We've had one staff member leave because she can't take the customer complaints," said Ryan Clark, director of the Essex-based freight forwarder Westbound Logistics Services.

Mr Clark said that as shipping orders into the UK have surged, the unloading time for vessels has increased. That means there are fewer berthing slots available at ports and congestion problems are getting worse.

Problems that have been plaguing Felixstowe for weeks have now spread to Southampton and the system is "broken", he said.

"The increase in freight is either creating more expensive prices for the consumer, or unsustainability for businesses that will be forced to close where the onward price cannot be increased."

A spokesperson for DP World in the UK, which operates Southampton port, said: "We are currently dealing with higher than usual yard volumes and also bad weather, including fog, leading to our truck turnaround times being longer.

"We expect levels to return to normal over the next week."

image copyrightHanson Stone
image captionPaving importer Ben Charlton said shipping services have become "shockingly unreliable"

'We've got to put prices up'

But Ben Charlton, a business manager for paving importer Hanson Stone, based in Mansfield, said logistics firms are telling him it will be two to three months before the situation returns to normal.

He said he's been waiting since the start of the month for containers to be unloaded at Felixstowe.

"We're a start-up company, we've only been running a year, we've had Covid to contend with, and now we've got this," he said.

He says he is paying about £1,200 more per container in increased shipping costs which adds up.

The company also operates on a credit system, where suppliers in India are paid 30-60 days after the stock arrives in the UK but the delays at Felixstowe are making cash flow a problem.

"Ultimately it's [all] going to get passed on to the end consumer and landscaping companies who buy from us down the line," he said.

Credit crunch

Eleanor Hadland, a ports analyst at the maritime consultancy Drewry, said "the whole global container supply chain is basically out of balance".

The system stopped working properly when economies in various parts of the world shut down and re-opened at different times, as they dealt with Covid-19, she said.

She warned the end result could resemble the credit crunch of 2008 when importers' lines of credit dried up.

"If the time it takes to receive goods at your shop is lengthening, you're having to find the cash to pay your suppliers sooner," she said, and that could have huge ramifications for global trade.

"What we're seeing is a trend away from globalised supply chains and people looking to buy goods regionally," she said.

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