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European ports and warehouses brace for surge in containers

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European ports and warehouses brace for surge in containers

by usiscc
April 12, 2020
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European ports and warehouses brace for surge in containers
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European ports and warehouses face a logjam of manufactured goods in the coming weeks as container ships which set off from Asia before the coronavirus pandemic spread reach their destinations only to find that demand has evaporated.

Merchandise which retailers ordered in the brief period when the Chinese economy was grinding back into gear, but before European countries went into lockdown, is starting to land at ports such as Rotterdam, Antwerp and Hamburg. 

But swaths of Europe are at a virtual standstill because of restrictions on movement and business activity which aim to stem the spread of the virus. With businesses from car factories to fashion stores shuttered across the continent, there are concerns that bottlenecks will emerge in the supply chain that takes goods from quayside to consumer. 

“This cargo is arriving in Europe and nobody wants it — that’s the problem. You’ll have four to five weeks of inventory piling up in the ports,” said Lars Jensen, chief executive at SeaIntelligence Consulting.

“Importers are going to be faced with the problem of overflowing warehouses and large amounts of goods they need to take delivery of that realistically they’re not going to be able to sell.”

Three-quarters of goods enter the EU by sea, while 30 per cent of trade within the bloc goes by vessels, so any hold-ups at maritime terminals could rapidly ripple through the distribution network.

The piling up of containers at ports is going to start happening. There’s only so long you can do it before it chokes everything

Port operators say they are fully equipped to deal with the influx of containers without tailbacks outside harbours. Although container volumes from Asia will increase from last month, they are unlikely to be higher than usual for this time of year, say industry figures. However the slowdown in consumer demand means they may prove harder to distribute than in normal circumstances.

Logistics firms face staff absences due to illness and self-isolation, and fear that cash flow difficulties caused by the economic slowdown could leave buyers of goods unwilling or unable to receive previously ordered cargoes.

Many of Europe’s border crossings have cleared after long queues in recent weeks and roads are emptier, but pinch points could emerge at off-dockyards where containers are stacked up, and warehouses which are experiencing a slower turnover of non-essential goods than usual.

At the world’s largest vehicle handling hub, the Port of Zeebrugge in Belgium, measures are under way to store thousands of uncollected cars, including covering unpaved land with gravel to create extra space for parking. 

“In the past three weeks, several terminals have been confronted with problems concerning incoming cargo and lack of storage capacity,” said the port’s chief executive Rik Goetinck.

Contingency preparations originally made for a hard Brexit should prevent blockages, he added, while there is enough space for some vessels to remain laid up at berth for several weeks if necessary, and a recently opened new terminal could accommodate excess containers. 

“We are expecting that some vessels will be used as floating storage, which we already see for automotive,” said Mr Goetinck. “It might be that we have a very small queue, but not more than that.” 

Shipping companies like French group CMA CGM are offering to offload cargo at intermediate points before the final destination, such as Piraeus in Greece and Algeciras in Spain for vessels on their way to northern Europe.

“We will keep this solution going for as long as is needed. But the question is indeed how long it will be needed,” said Luc Portier, head of development at CMA CGM. “At some point we will reach a saturation point.”

Editor’s note

The Financial Times is making key coronavirus coverage free to read to help everyone stay informed. Find the latest here.

Logistics chain backlogs risk slowing deliveries of vital supplies to hospitals and supermarkets, some firms say.

Philip Edge, chief executive of UK freight forwarder Edge Worldwide Logistics, said his company has gone from arranging transit for “the odd container” of personal protective equipment like masks and gloves to “dozens and dozens” each month.

“The piling up of containers at ports is going to start happening. There’s only so long you can do it before it chokes everything,” he said.

There are also bottlenecks on the return route: for European exporters to Asian markets, there has recently been a shortage of containers for this “backhaul” leg.

While a dip in container shipments always occurs around Chinese new year, the normal weekly capacity of 450,000 units from Asia to Europe was down by 20 to 30 per cent in February and March, according to SeaIntelligence. 

Magnavale Group, a British cold storage provider that freezes pigs’ heads, trotters and prime cuts of meat for shipment to China, struggled to obtain refrigerated equipment. 

“There was nowhere for the pork to go, so our customer had to almost stop production for China,” said Magnavale director Andrew Lawrence.

The pick-up in Chinese economic activity and the increase in container ships arriving at European ports has eased that problem: the number of containers that Magnavale sends to Asia fell by two-thirds earlier this year but the company is now back to dispatching 35 boxes a week.

Once the upsurge of ships into Europe is over and goods make their way through the system, however, the continent’s sharp plunge into recession suggests those involved in handling cargo will face leaner times.

“In the next week or two we’ll see a little peak [of arrivals], but beyond that it will look quite grim,” said Tom Dynes of Solent Stevedores, which provides terminal services at the Port of Southampton in England. “A lot of people have cancelled sailings.”

Additional reporting by Delphine Strauss in London

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