Brexit uncertainty hurting UK car industry

Automotive supply chain issues not just about semiconductors

Jul 15, 2021 | , ,

An unexpected upturn in consumer demand is playing havoc with Europe’s automotive supply chains, as supply shortages disrupt OEM’s manufacturing productivity

Factory shutdowns were a significant contributor to poor sales in 2020 and there were fears that a shortage of semiconductors would be manufacturers undoing in 2021.

The semiconductor chips are important to the microcontroller units that underpin everything from the transmission to the airbags in modern vehicles and without sufficient supply, automakers would be forced to extend plant shutdowns - as many were.

In the UK, a shortage in semiconductors is causing major disruption, hitting car manfacturers and OEMs [original equipment manufacturers] with restricted availability of critical components and parts, meaning factories are either about to, or are already, shut down in Europe and the UK. There are many components in a vehicle and missing one of these causes delays – missing many causes serious delays to the delivery of a vehicle to the end of line.

Germany recorded a 16% increase in its first-half year car production, but such has been the scale of recent disruption that its full-year forecast has been slashed. This is Europe’s largest car and vehicle manufacturing country, with many other factories dispersed on a regional global level.

Reports suggest German manufacturers were caught by an unexpected surge in demand, having idled production early in the pandemic and were unable to scale up their supply chains and operations when needed.

Semiconductor shortages are a global issue, with OEMs typically balancing global supply to try and keep certain models being produced. This isn’t unique to the automotive sector, which is part of the issue, as higher value products pound for pound absorb the increased availability of the essential commodity which is required in most electronic devices from a car to a mobile phone.

The UK is not being slower than any other region, as the global supply chain is experiencing rolling difficulties across regions, with manufacturers having to pause production at domestic and European mainland plants due to semiconductor shortages.

It is unlikely that the semiconductor problem will be resolved in 2021 and is likely to extend into 2022.

Despite the difficulties in Europe, automotive OEMs in other regions are recovering productions, particularly in Asia, where they are in proximity to the primary semiconductor suppliers, with specialist automotive Ro/Ro carriers returning to full automotive capacity.

Metro has been working with automotive manufacturers and their primary suppliers for decades, optimising complex inbound and outbound supply chain operations, on all modes of transport.

For further information on automotive and related logistics tailored platforms that Metro deliver please talk with Tom Fernihough or Grant Liddell who will be delighted to arrange a meeting, call or presentation covering all current options available within our global network and platform.

Colombo

Westbound sea freight market update

Jul 15, 2021 | , , ,

Demand for imports from Asia and the Indian subcontinent (ISC) continues to outstrip shipping line capacity, in a sign that with inventories low, second-half volumes are unlikely to let up, keeping pressure on a global supply chain infrastructure that is already buckling.

The UK’s primary container ports will be expecting a spike in imports from China, as the backlog of cargo that had built up in Yantian during the COVID-19 outbreak in May and June arrives, to add to traditional peak season volume that runs from August to October. This is also being experienced throughout Europe, The Americas and most major trading regions and is not unique to our little island – which is where the problem lies as global logistics is now an inter-related network which has ripples everywhere regardless of the source of the ‘problem’.

Peak season demand is further complicated, by massive backlogs of unshipped containers in China and the ISC, with Yantian arguably experiencing the worst backlog, though vessels are also backed up in Shanghai and Ningbo. It would seem the ‘worlds factory’ has broken its despatch bays.

An estimated 14,000 TEU of export containers are stuck at the main Bangladeshi port of Chittagong, owing to the capacity crunch involving feeder vessels and congestion feeding back from global ports, with some containers waiting to ship for up to 30 days.

Equipment shortages, congestion and berthing delays in Chittagong, have forced some carriers to halt or slow bookings from Bangladesh and rates are likely to be impacted by the instability in ports globally.

Lines have not stopped taking bookings from Chittagong, but there is caution, in the absence of confirmation of space allocation on mother vessels at transhipment ports.

All the major shipping lines have very limited space from Indian ports, with waiting period to secure bookings increasing drastically over the past few weeks and contractual bookings not being honoured.

The lines quite simply don’t have the space to meet all their bookings and are either not quoting, are trying to sell space for a premium, or have kept higher rates on selected routes to discourage new bookings.

CMA-CGM has announced the blanking of their Europe Pakistan India Consortium, EPIC and EPIC2, sailings from Western India for week 29, and weeks 28 and 29 respectively.

We have worked closely with strategic partner shipping lines for decades and despite our good working relationships and the lines best efforts to support us, we still have to accept some cargo being rolled, and have no choice but to accept blanked sailings, though our commercial team typically find space for rolled, or blanked containers, on the next available vessel.

In a worrying move for the three shipping alliances last week, the Biden administration called for the Federal Maritime Commission to crack down on excessive detention and demurrage charges. The President’s order characterised the ocean freight industry as a highly concentrated, foreign-owned, anticompetitive sector which can disadvantage American exporters and importers. 

It is expected this move will be replicated in other countries, as the repercussions of high freight and logistics costs escalate inflation, which now looks unavoidable, filtering into the cost of raw materials, consumer products and throughout the supply chain.

The White House order comes against a backdrop of skyrocketing freight rates, but the World Shipping Council, which represents the carriers, refuted the concept that the rate spike is connected to concentrated market share, noting that all available vessel capacity is deployed, ports are saturated with cargo and importers struggling to turn around containers.

It pointed to recent developments that indicate the functioning of a competitive ocean freight market, like new entrants, new services and massive vessel orders to increase supply.

Last week, the European Commission confirmed that it is "closely monitoring" the shipping industry and is looking into "any scope for intervention that can facilitate return to normal operations.”

Metro negotiate rate and volume agreements with a wide range of carriers across all three alliances, which means we can react quickly to market changes and offer shippers alternative services, in line with their deadlines.

Our fixed validity contracts provide supply chain security and peace of mind, but with space and equipment in such short supply, we recommend a minimum of four weeks visibility and booking window, to secure space on the vessel and get the right equipment positioned.

Truck in Switzerland

Extended hours and secret visa talks to end driver crisis – or will they?

Jul 15, 2021 | ,

Driver hours have been temporarily legally extended and the government launches secret visa talks for foreign lorry drivers, amid a staff shortage that threatens to undermine supply chains.

Over 45,000 HGV driver tests are outstanding at DVSA as a result of the COVID-19 lockdowns, while 79,000 European logistics workers returned to their home countries following Brexit and recent tax changes which, combined with an existing shortage of HGV drivers, has left haulage firms struggling to recruit new drivers.

The Department for Transport (DfT) is consulting with industry bosses on how to tackle the crisis, as the estimated shortfall of 100,000 lorry drivers has left shelves empty and pushed up prices. That is just in the UK and this problem is a logistics ‘pandemic’ globally in its own right being experience on all continents.

The government recently granted temporary visa status for agricultural workers to ensure that important crops are picked and Logistics UK (formerly the Road Haulage Association) asserts that without temporary visa status for drivers to move those crops - and all other products - supply chains will break down.

Reports in the press suggest that government ministers have launched secret talks over a short-term visa scheme for foreign lorry drivers, following a concerted campaign by trade bodies, to resolve the staff shortage that is impacting the supply of all goods.

The Home Office is opposed to relaxing visa controls and the haulage industry has been directed to provide evidence on the value of a temporary visa scheme, but with the Home Office taking a hard line, the very best evidence will be needed. This will take time with no immediate decision and then, if it does get approval, an uptake from willing overseas workers willing to relocate to the UK.

The visa talks followed last week’s government announcement that HGV drivers would be allowed to work ten hours a day, instead of nine (until the 8th August). But the bid to tackle driver shortages is not having the intended impact.

With extended hours driving a heightened demand for drivers, particularly from supermarkets, a boom market has ensued for recruitment agencies, who are moving drivers from firm to firm, raking in fees as rates climb, but the issue of driver shortages is not being addressed. It seems to be circulating within the industry as demand continues on both international and domestic needs.

The poaching of drivers from international, containerised and air freight transport to retail logistics, is leaving a critical part of UK business exposed, with significant short-term problems, that are likely to get worse, possibly over the long term. Simply put retailers can only deliver what they have in their available inventory and stock within their warehouses either through their bricks and mortar or online operations.

We are already seeing the direct impact of hauliers increasing their drivers’ pay, in desperate efforts to hold onto them, with firms issuing“driver retention surcharges” to cover the costs.

The additional problem for freight transport companies is that driver pay is not the only issue contributing to their flight to supermarkets and retailers, or other domestically orientated verticals. Working conditions are typically better, with more amenable hours and none of the queues that freight drivers continue to face at ports and inland terminals. Just this week, drivers are refusing to attend MIFT, due to queues of more than four hours.

With the shipping lines already struggling with haulage resource for collections and deliveries ahead of peak season, it is apparent that there is going to be a massive impact when peak season hits - on driver availability and cost - which will get even worse when the holidays start and demand really spikes. Or when the fallout of COVID-19 self-isolating is factored in, that has been widely reported in the national press.

Road transport is critical for freight collection and deliveries and the international movement of goods. The congestion issues and driver shortages that the UK is facing, are being experienced across Europe and the United States, with the latterly suffering particularly pronounced problems, with containers taking weeks to complete internal round-trips, from port to delivery and empty restitution.

We work with a number of selected long-term haulage partners across the UK, Europe and the US, to give us access to the widest pool of equipment and driver resource for each market. 

For further information on our road transport operations please contact Grant Liddell or Simon Balfe who leads our UK multimodal transport operations.

Coronavirus impacts air and sea freight

Excessive demand likely to mean higher contract rates next year on all modes

Jul 15, 2021 | , , ,

The early start of the sea freight peak season and its likely extension through 2021 and possibly up to the Lunar New Year in 2022 means the chance of current market rates softening significantly are slender, particularly as disruption in any region creates more congestion and delays, pressuring prices as shippers try to secure scarcer slots.

If they have the chance to ship, many importers have already started to move Christmas orders, to get their goods in the warehouse early, or at least on time. However this is coming with a premium to the budgeted cost.

This COVID-driven phenomenon is contributing to the early peak season we are seeing and means a continuation of high freight rates, and increased demand as shippers struggle to find space for their cargoes, whether by ocean freight, air freight, rail or overland.

And with the supply chain disruptions from the Suez Canal blockage and Yantian port partial-closure continuing to impact pricing and equipment availability, more incidents, accidents or disruptions will have disproportionate impacts.

With global port and inland infrastructure already at full capacity or exceeded, at many locations there is simply no possibility of handling more volume and the lines continue to struggle to recover equipment or even get a berthing window. It is easier for them to take a vessel out and blank a sailing, rather than operate all their vessels and add to the congestion. Many shipping lines are struggling to get their schedules realigned which has a significant impact on consistency and predictability of service.

The record-breaking rates being seen on the spot market are not expected to come down, as long as shippers are willing to pay premiums to secure space, in a restrained environment.

Even the biggest shippers (beneficial cargo owners - BCO) and forwarders with contracted volumes are impacted.

Although contracts are being honoured by most carrier partners, there is limited, to no, flexibility on the volume side. In the worst cases carriers are only honouring agreements for a percentage of the agreed volume, meaning further negotiation and alternative solutions need to be sought.

While the very largest shippers, such as the supermarket retailers, will generally be secure - even they will not get additional boxes moved against the tender rate - smaller volume contract holders have been cut off by the lines and forced onto the spot market completely, alongside those shippers who held off contract negotiations this year in the hope that freight rates might fall after Chinese New Year in 2021. It did not happen.

Both groups have been badly hit by higher rates in 2021 and will now be trying to guess what next year might offer.

With no signs of the situation easing, contracts will be agreed in a sellers’ market, where the carriers have no inclination to negotiate, and are quite happy to push BCO’s into the FAK market and 1,000 boxes a year is now considered paltry.

With strong demand for space and limited capacity likely to extend into next year, we encourage shippers with pending orders to contact us now, to get the most attractive options and protect their supply chain.

As we enter the traditional peak season for ocean and air freight it is critical that you book your shipments at the earliest opportunity, which is why forecasting is a key component within the current market.

Please contact us immediately to see how we can support the movement of your products to market or manufacturing locations globally. Metro will always provide you with all options and transparency in how to achieve your expectations and deadlines.

Category: Supply Chain

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