Chris Evans, Senior Consultant at Colliers, provides an update on the world of International shipping, logistics and supply chain post-COVID, and of course the niggling implications of Brexit.
The impact of a strong vaccine programme and the positive Budget last week is expected to prompt rapid growth in consumer activity throughout the Spring and until Q3, when we anticipate the impact of job losses may come through quite rapidly.
As we look ahead to March and April, we expect to see some delays in UK ports as high volumes of containers from China arrive, following the Chinese New Year hiatus, each vessel bringing approximately 6,000 containers on each port call. It is the sheer volume and impact of COVID-secure working procedures that will cause most delays. There is already congestion at Singapore which is the key hub for south east Asia.
In the meantime, M&A activity is already quite high, with Kerry Logistics of Hong Kong selling to SF Holdings; and Ligentia partnering with venture capitalists, Equistone. Kuehne & Nagel have also acquired a forwarder in China to strengthen their position. These deals demonstrate a clear appetite for consolidation and change of ownership in the logistics sector.
Ports are expected to be one of the main growth sectors over next ten years, and this is having a positive knock on effect on the wider economy, helping to drive growth into other sectors across the UK.
In previous updates, we have looked at the amount of congestion at container ports around the world. This has improved slightly since Chinese New Year but for the moment, container ships are still filling up rapidly in the Far East, bringing congestion and delay at the main ports. Plus, the industry is still dealing with the impact of a global shortage of shipping containers.
Freight rates remain at record levels in the ‘Far East to Europe’ trade route and the same situation applies in other parts of the world with very significant delays in the LA/Long Beach port areas, mainly due to COVID restrictions.
Meanwhile, I watch with interest the development of talks around the potential strikes by dockers at the Port of Montreal, eastern Canada’s biggest port. The impact of any decision to strike is a potential harbinger of further disruption to the global shipping network and port congestion. There are plenty of alternative ports in the USA.
With regards to Brexit and the UK, there are still some issues, partially due to SMEs and their business operations not adapting their terms of trade and so falling foul of local customs and other state regulatory bodies, which have differing interpretations of VAT rules etc within the EU.
The haulage delays at ports and railheads are still an issue and this will continue for some time until we are truly post-COVID and newer ways of operating “safely” have evolved to become more efficient.
In the meantime, many retailers have adapted their supply chains to deal with the new reality, and this will give rise to a greater demand for more warehousing space; the next phase being an increased need for a larger amount of automation and mechanisation in warehouses. Although at the same time, there is growing requirement for more labour in the appropriate warehouse locations, creating another demographic shift. This will also lead to a much greater demand for power (green economy).
All of this will see increased demand for more new purpose-built buildings in the Industrial & Logistics sector within the Freeport zones. The government has announced it is seeking to grant Freeport status to ten ports across the UK, the programme of simpler planning, cheaper customs and lower taxes will go a long way towards encouraging this construction, private investment, and job creation.