As we all continue to adapt to the changes and challenges in a world radically changed by a global pandemic, I think we can all agree that it’s not quite business as usual – it’s even called the ‘new normal!
At Phoenix, we always keep in regular touch with our clients, and work hard to uphold our core customer service values, one of which is to ‘anticipate the market rather than just react’. So, that being said, in the last few weeks as we talk to our customers, partners, and colleagues across the globe, we have been taking a look at one of the key issues being faced across the industry at the moment – namely; delays, and more importantly, why those delays are occurring.
One of our Account Managers, Tim Bailey, working out of our main UK office, summed up the key challenges for one of his Purchasing Managers recently, and gave some key insights into whats’ happening day to day to cause these delays. We wanted to share this information out to everyone facing the same unavoidable problems, to help explain to end customers why their product timelines are being adversely affected.
What’s Happening at the Ports
Normally, every November to January+ the shortage of containers and delays at the ports is common; it’s the busy season for Christmas and New Year for most of the world and the Chinese New Year holiday shutdowns and celebrations start for local workers at China’s main ports.
However, it’s never been worse than this year, and that is strictly due to the COVID-19 influences on businesses. Manpower shortages and new rules due to the pandemic have had a colossal impact on moving goods around the world.
Shipping & Freight Issues
Vessels & containers from all over the world are moving in what seems to be slow motion, and sometimes completely “missing”. They have reduced workers at the ports and on the ships. This has caused the freight charges to rapidly increase as people “bid” for available space.
Before this, the normal freight charge from China to Felixstowe, for example, was about $1500.00 – $2500. Now vendors pay around $12,000, and even then it is still very difficult to book vessel space.
Ports & Manpower
To give you an insight into port issues – a few weeks ago at Shanghai port, drivers lined up for up to 5 days just to enter the Shanghai shipping warehouse to unload. Many drivers had to leave and try to come back another day during this colder period, as their trucks are not heated cabs.
We see the same delays at the ports here in the UK. All said to be man power related due to the new COVID-19 rules/restrictions. There are simply less available workers to process the goods on both sides of the ocean.
All of this creates a problematic ongoing cycle, as one vendor recently explained. In Europe and the USA ports are very congested due to less workers, which ultimately means a vessel can’t be called into port on time. Then, after it is eventually cleared for arrival at port, because of less man power, the container can’t be unloaded on time, and it must be unloaded fully before it can be re-loaded for return trip.
It therefore waits for the cargo to be loaded, but to prevent an even later departure, the vessel only loads part of the usual quantity of empty containers to haul back. Sometimes as little as 20% capacity. The same happens again when vessel arrives back in China. Due to a manpower shortage there, the vessel can’t arrive at China’s main port on time as scheduled, and when it does, there are less empty containers available for re-loading.
So, unfortunately this situation keeps re-circulating and getting worse and worse.
Exchange Rate Factors
The other factor at play on the rising freight – and also on the materials themselves – is the exchange rate. RMB has increased more than 8% since the beginning of 2020 with no sign of reversing any time soon.
Rising Infection Rates in China
As the Chinese New Year began, COVID-19 cases in China were rising and the Hebei province put three cities – Shijiazhuang, Xingtai and Langfang into lockdown alongside the Heilongjiang province, which put the city of Suihua into lockdown. At the moment this hasn’t caused factory shutdowns on the scale seen in 2020 – with only a few specific locations/factories affected, but it’s an ongoing task to monitor this situation and the associated impacts.
We’ve highlighted a few sources below that are of further interest, when looking at the delay situation.
Lastly, a note from the Phoenix Team
We monitor all fluctuations in the market extremely closely so we can provide up-to-date information to all our customers. We have people in strategic locations all over the globe ‘feeding’ us this information as soon as it becomes available. Please speak to your Account Managers or main team contacts if you have any concerns or queries, as they are always only a phone call or email away. Let’s hope the situation improves as the kinks in the ‘new normal’ are ironed out globally, so we can move forward into better times, and in the meantime, we will keep in touch.