There are still plenty of problems, with Europe now in the eye of the storm as industrial action rises following the pandemic. In ports such as Rotterdam, Europe’s largest, delays and strikes have led to huge pile-ups of export containers and forced ships into lengthy waits for docking space.
Earlier this month, shipping giant Maersk warned clients that congestion was at “continuously critical levels”, saying it would clear containers to “off-dock facilities” if they are not promptly collected. Rival Hapag-Lloyd has imposed blanket congestion surcharges, in an effort to prompt collection and delivery of containers.
“It’s not just kind of how quickly the ships can arrive [and] how quickly they can be unloaded,” says Judah Levine from freight booking platform Freightos. “There’s a whole bunch of other inland factors to what’s keeping that congestion a problem as well.”
Germany’s IfW economic institute estimates 2pc of global freight capacity is currently stuck in the North Sea.
These pressures are being exacerbated by a drought in parts of Europe. Water levels are so low at a key choke point on the Rhine, the river which acts as a lifeline for swathes of German industry, that barges are having to cut their loads to lighten up. “Intakes have already dropped significantly to basically all Rhine destinations,” says Jelle Vreeman, a shipbroker at Riverlake in the Netherlands.
Every problem has a domino effect that reveals how vulnerable the system has become. Where distributed production systems were once a strength of the globalised system, they have become an albatross for many companies.
But external pressures may be easing. US researchers at the University of Colorado say logistics growth is finally losing pace after a post-pandemic boom. By their measure, expansion in the sector has fallen below the all-time average for the first time since July 2020.
“We are also seeing a different type of growth now than we were previously,” they said in a report published this month. While demand for warehousing and transportation had been booming, now “the opposite” is true – inventories are building.
Recession fears are rife, particularly in Europe, as the pent-up demand of the end of lockdown gives way to a state of stagflation: weak growth and rapidly-rising prices.
Fearing continued disruptions, many companies made unusually large orders. Those are finally beginning to arrive, just as demand slows. In many instances, that has led to accidental stockpiling and goods being left at ports because the warehouse they were destined for is full.
If importers cut orders in response, that could then further ease the pressure on freight prices.
Yet it isn’t just importers who may have been over-eager. Shipping companies took advantage of the money made from soaring rates to put in bumper orders for vessels. Much of that new capacity will arrive next year, when booming trade activity may have quietened. Oversupply and easing demand are a recipe for the situation to improve — a potential relief for British households.
“I would expect the rates to soften quite significantly in the light of what could easily be a recession in the UK,” says James Hookham from the Global Shippers Forum, a trade body for cargo owners.
“Hopefully that won’t be a spectacular implosion, because no one wants that degree of chaos in the industry again.”
As the West prepares for its busiest economic period, bosses will be hoping nothing else causes prices to rocket again.
