Analysts at risk modelling company Russell Group have warned that just under $2 billion of UK trade imports could be impacted in the run-up to Christmas if the current ports delays at Felixstowe continue into December.
But with supply chains coming under pressure globally, losses will likely be acute elsewhere as well, according to re/insurance broking specialist McGill and Partners.
Continued container shortages, port delays, congestion, increased freight costs, logistics equipment in the wrong place, and a lack of haulage options has ultimately resulted in delays being widely reported.
“The issue for cargo-owners is what the delays will mean for their business. As we’ve already seen following the Ever Given’s grounding in the Suez Canal, many of these ships contain perishable goods; delays ultimately mean that those goods are compromised or even worthless upon arrival at their destination,” said Kevin Rimmer, Head of Cargo at McGill.
“The bad news for many owners is that ‘delay’ is commonly excluded within their marine insurance. This could mean that the industry could experience significant financial losses as a result of the delays within the supply chain. Losses that are unquantifiable and ultimately unsustainable.”
Clothing would be the largest commodity to be impacted by the delays at Felixstowe, and could put significant pressure on the UK high street, with Asda and Tesco facing $63 million and $46 million impacts, respectively.
Felixstowe is one of the UK’s largest ports with an annual flow of trade of more than $9.6 billion, and handling 36% of the UK’s containerised freight, as a shortage of lorry drivers causes delays in moving containers.
“The delays at Felixstowe in coping with the pent-up demand should not be a surprise to experienced observers of global trade events, as this is an issue that is affecting major ports from Long Beach to Yantian across the world,” Suki Basi, CEO of Russell Group.
“As Russell has argued in the past, trade is becoming more and more concentrated, as shown by previous analysis of $7.5 trillion of global trade flows through 50 key ports. So, when there is a blockage at any major port, there is disruption across the value-chain for consumers and businesses alike,” Basi explained.
“Assessing the impacts of disruption or blockage events like Felixstowe on trade is absolutely essential. This can be done by analysing trade flows at country, route, operator, ship, commodity and company levels. This approach allows underwriters and corporates to assess their exposures on a timely, granular basis, enabling business portfolios to remain viable in these closely interconnected, fast changing times.”
But Rimmer warned that a solution to the broader issues facing global supply chains will be extremely difficult to resolve, due to the complex factors at play.
“The solution to this issue is not clear either. Encouraging more HGV drivers has been a key focal point as of recently, but there are other challenges that require addressing too,” he noted.
“The first is the definitive shortage of container ships and bulk carriers. This issue won’t be solved overnight, with most shipping firms waiting for up to 12 months to see new container vessels in circulation. The short supply of both types of vessels has meant freight rates have skyrocketed by up to five times pre-pandemic levels.”