What are the current issues at Felixstowe Port and are these a sign of things to come as the ‘Brexit’ Deadline approaches?
Felixstowe, the UK’s main port for the import of containerised goods is suffering congestion, with the issues summarised in the following communication from a shipping agent:
“The port is continuing to see huge import volumes1 and continued issues with the VBS (vehicle booking system) resulting in a major lack of available slots and a continued lack of labour at the port.”
“The knock-on effect has been:
- Vessel diversions to other UK ports
- Vessel ‘cut and runs’ (terminate discharge/loading operations before all the boxes have been discharged or loaded)
- Missed rail connections due to slow turnaround of drivers
- Containers being left on the quay beyond the free time as hauliers are not able to get VBS slots2
- Issues being reported at other ports due to the knock-on effect of additional volumes
- CMA are still not accepting restitution3 of empty containers at Felixstowe Port (NB all others are now accepting these again)”
“As a direct result CMA CGM4 have announced the application of a congestion surcharge at Felixstowe of $150 per TEU5 and we expect other carriers to make similar announcements in the coming days.”
1 As per the September IHS Markit PMI report there has been a massive recovery in manufacturing output following the initial Covid-19 demand shock, with the consequential spike in imports required to replenish depleted supply chains.
2 Late collection of containers from the quay result in expensive demurrage charges.
3 Restitution is the return of containers. If the shipping line does not allow return to the port from which the container was collected from, this is likely to add cost and complexity.
4 CMA CGM are a shipping line and own their own fleet of containers.
5‘TEU’ is defined as a 20-foot equivalent unit.
What does this mean for polymer imports?
Based upon plastic raw materials being imported in either 20’ or more typically 40’ containers, the ‘direct’ cost implications of the CMA CGM surcharge of plastic raw material imports can be summarised as follows:
|$ 150.00||per TEU|
|$ 1.27||Exchange Rate|
|£ 117.98||per TEU|
|Typical Load Tonnes||Premium Per Tonne||Premium per tonne including Duty @6.5%|
|£ 235.96||40′ container||
|£ 8.74||£ 9.31|
|£ 117.98||20′ container||
|£ 6.94||£ 7.39|
According to the British Plastics Federation (www.bpf.co.uk) the United Kingdom imports £4.76bn of plastic materials of which £4.0bn is from the EU and £760m from the rest of the world.
Data from Euromap (www.euromap.org) reveals that the UK’s installed polymer production capacity represents less than 60% of the quantity consumed by UK plastic processors and when accounting for exports from the UK, along with the polymer types and grades that are not manufactured in the UK, our sector may be up to 80% reliant on imports.
Whilst, from a European perspective, Italy is in a similar position it should be noted that the UK is not connected by a land border to mainland Europe and will be leaving the EU at the end of this year. As such, the UK is heavily reliant on the smooth arrival of plastic raw materials via both ports and the Channel Tunnel.
In addition to the issue of direct cost inflation, UK plastic processors currently face the risk that the arrival of raw material is delayed with the potential of down-time, additional costs to source alternative polymer and failure to meet the expectations of their own customers.
Whilst the congestion issues at Felixstowe may be resolved in the short-term, the end of the UK/EU 27 transition period brings further cause for similar concern. Whilst it is obvious that the introduction of a ‘hard border’ between the UK and the EU is likely to delay vehicle movements and create port congestion at the ‘Channel Ports’ there is also the issue of imports from outside of Europe that actually arrive in the UK via members of the EU27.
A clue to the extent of these ‘3rd party imports’ comes from the first table depicting the relatively high level of imports from Belgium and the Netherlands, where plastics raw materials imported from outside of Europe are landed and stored subsequent to redelivery to neighbouring European countries including the UK. From January 1st 2021 it is likely that many of these 3rd party imports will become direct imports to the UK via deep-sea container ports such as Felixstowe, this diversion will attempt to avoid the both risk of Channel Port border delays and potential complexities resulting from import duties ( which may change significantly depending upon what trade deals are put in place both with the EU27 and other countries); these additional volumes of plastic raw materials and other products have the potential to once again overburden available capacity at Felixstowe
The important message for UK plastic processors is for them to perform due diligence on their raw material supply chains, paying particular attention not only to those supplies from European polymer producers but also that are currently 3rd party imports, and where necessary put physical contingencies in place to ensure that the almost inevitable disruptions to supply do not impact their manufacturing operations.