If you thought the blocking of the Suez Canal caused major hold ups in global logistics well brace yourself - Yantian nothing yet!
You may recognise the name ‘Evergreen’ if you’ve followed recent news.
That’s the ship that blocked the Suez Canal for 6 days, causing major disruption to global logistics and adding significant delivery delays for retailers, manufacturers and consumers worldwide.
To some degree, we are still feeling the effects of the canal blockage as hundreds of ships had to be re-routed to get to their destinations causing disruption to global supply lines.
However, this pales into insignificance when you start to google the name ‘Yantian’, and see the major problems this massive port in South China is now causing.
In the short-term, it needs everyone to work together so that we can get through the coming months.
What is Yantian and why is this bad?
If you’ve never heard of Yantian, you’re not alone, but this natural deep-water port is one of the busiest container terminals in the world.
Over 30 major shipping lines operate more than 100 services a week and its significance is only now being realised as an outbreak of COVID at the end of May partially paralysed the container port after the authorities shut it down for several weeks.
Last year Yantian handled 17.5 million teu. To those not familiar with shipping language, a teu (or twenty-foot equivalent unit) literally equals one 20-foot container – that’s 17 and a half million containers!
The average ship can carry more than 18,000 teu’s with mega ships like the Evergreen able to hold over 21,000.
The port has been operating at about 20% capacity and has been slow to increase productivity, with average waiting times for a berth at the port jumping from half a day, to 16 days or more.
This means that an awful lot of ships – and a huge amount of containers, are held up and aren’t in the right place at the right time.
And this is affecting global logistics, not only because containers aren’t arriving where they should, it also means that many places are facing a serious shortage of empty containers.
The BBC recently reported that this could lead to disruption and delays that could even affect Christmas orders.
And a report on The loadstar.com says that the shipping industry is facing “a perfect storm” and an “an era of unprecedented disruption”, caused by the acute congestion in Yantian, which is now spreading to others.
Price rises and ongoing issues
So we have hundreds of ships with hundreds of thousands of containers all delayed or in the wrong place, whilst this globally important port slowly tries to get back to full productivity.
The first knock on effect of this is that prices are rocketing, increasing the already high costs of shipping.
Even more importantly though, as Yantian starts to open up fully and releases the bottleneck, there will be a flood of ships arriving at ports around the world, aiming to find slots to offload, on docks that are also struggling to cope with the pandemic.
European ports have suffered due to COVID and regionally, we already have containers in the wrong place, or sitting on a dockside waiting for onward movement.
And then there’s the ongoing issues with the trade agreement between the UK and Europe – otherwise known as Brexit.
This has increased the red tape needed for logistics and the whole situation is compounded by a Europe-wide shortage of drivers.
Local UK issues
Here in the UK, the driver shortage is exacerbated by two things: Firstly, the road haulage industry hasn’t been training enough UK HGV drivers, and now there is a backlog and delays in applications because of COVID.
Secondly, due to the Europe-wide shortage of drivers, EU nationals are choosing to stay working in Europe and we have seen a significant drop in the number of drivers prepared to come across the Channel.
News reports in magazines such as UK Haulier report the “UK about to experience a catastrophic HGV Driver shortage”.
These reports are repeated on the BBC (Brexit: Lorry driver shortage could mean higher prices in shops), The Daily Mail (Fresh food rotting in cold stores due to a Brexit HGV driver shortage), The Scottish Herald (A summer of shortages), and even the American Journal of Transportation (UK truck driver shortage after Brexit emerges as drag on trade).
At the moment in the UK, there is an estimated shortage of 78,000 licensed, qualified HGV drivers.
What this means for construction and the HVAC sector specifically, is that once ships do escape the Yantian bottleneck and come to Europe, they still need to negotiate delays at European ports.
Then for the UK market, there is an ongoing issue of disruption at places like Felixstowe, which has led to UK containers being off-loaded in Europe – and then needing road freight delivery across the Channel – if they can find drivers willing to cross the Channel.
And, once all those obstacles have been overcome and the material or equipment has reached its central destination in the UK, all industries are facing the massive problem of how to trunk that on to distribution hubs, and then on to factories and building sites the length of the country.
What we are doing
The UK construction industry is already facing shortages of raw materials and this is having a knock on effect to the HVAC sector.
Adding on the additional challenges posed by the global logistics issues, the European port challenges and the UK and European driver issues, means that our customers face a difficult and challenging time.
For our part, we are doing all we can to support customers. We use our own dedicated logistics where we can and, in the main, any problems that we are facing are caused by third party companies. We are talking to these suppliers daily so that we can minimise any delivery failures.
To look to improve our stock holdings across most of our thousands of product lines, we are working with our manufacturing plants here in the UK, Europe and the Far East to increase production and to look to meet customer demand.
However, like every other manufacturing plant globally, they also face the double challenge of global logistics and raw materials shortages.
Where we can, we are air freighting in deliveries to provide more certainty, and we are also calling to our colleagues in other European markets so that we can source additional products that are more popular here in the UK.
Finally, we are working with our customers to adapt designs, modify individual models and reconfigure orders so that we can help them fulfil as many projects as possible.
It’s also worth remembering that as an industry, there is a vast array of products and together, we have the innovation, the skills and the technology to overcome many of the issues currently faced.
So although we know that there will be occasions where deliveries fail, or individual product lines are in short supply, by working together we will be able to tackle a lot of the current challenges.
It would appear that current circumstances have created a ‘perfect storm’ and, like all other suppliers to the UK construction market – and in fact all other industries – we are highly likely to face more disruption, delays and failed deliveries in the coming months.
To help us all come through the next few months, we will be working with our clients to adapt the process’s for ordering, procuring and delivering equipment, simply because the market conditions have changed so dramatically.
We realise that we need to be able to give customers as much certainty as possible – in extremely uncertain times, so we are doing all we can to build a picture of demand that we can be certain of satisfying.
The simple truth of the matter though is that this problem is not going away quickly and it is not limited exclusively to the HVAC industry.
In the short-term, it requires us all to make some changes, and it needs everyone to work together so that we can get through the coming months.
This really is the only way and, if we have learnt anything from the challenges of the last year, it is that by pulling together and working with each other, we have been able to survive the pandemic and are ready to build back our businesses and our economy – when the circumstances allow!
Alex Black is Operations Manager