Brexit Stockpiling Frenzy Fuels Chaos in Cross-Channel Trade

Date: Friday, December 11, 2020
Source: Supply Chain Brain

The split from the European Union is fueling an increasingly frenzied demand for goods, creating traffic snarl-ups at ports and highways on both sides of the English Channel and leading to at least one major factory shutdown.

Truck traffic in Britain and France is building up on major arteries leading to maritime hubs, while freight rates are surging and Tesco Plc, Britain’s biggest grocer, is taking steps to avoid delays at Dover, the busiest U.K. ferry port.

Japanese automaker Honda Motor Co. said Thursday that it will keep its Swindon, England factory shut until Dec. 14, due to delays in the arrival of parts. The manufacturer had halted production Wednesday at the plant as congestion at ports trying to cope with Brexit-related demand affected deliveries.

U.K. importers have long warned of serious disruptions to supply chains across a host of industries due to Brexit. With the transition period for Britain’s departure from the bloc due to end on Dec. 31, the nation will have to adapt to new terms for dealing with its biggest trading partner alongside the coronavirus outbreak and the holiday retail rush.

And those terms haven’t yet been decided. Talks Wednesday over dinner between Prime Minister Boris Johnson and European Commission President Ursula von der Leyen ended without a breakthrough, and their negotiating teams have until Sunday to come to a firm decision on the future of the negotiations.

The strains are producing some unusual sightings at the French harbor of Calais, the key departure point for goods headed across the Channel by truck. Jean-Marc Puissesseau, the port’s president, said among the goods bound for Britain have been high-end sport cars from Ferrari and Maserati to more down-to-earth vehicles like tractors.

“There is stockpiling going on because of fears of a no-deal,” he said in an interview. “We’re seeing all kinds of things going by that point to people stocking up in case of tariffs.”

French authorities this week have been regulating access by trucks to Calais to prevent major jams, pulling hundreds of trucks off the A16 highway into two specially opened way stations, according to a spokeswoman for the Nord prefecture.

The port is experiencing the highest levels of truck traffic so far this year at a time when the number of daily vessel rotations has been reduced due to the pandemic and construction work has limited parking, Puissesseau said.

Brexit-fueled demand for goods in the U.K. has led to heavier traffic and longer waiting times for drivers, with cargo flows to Dover rising steadily since the start of the month following a near 20% jump in November.

Tesco Chairman John Allan told Bloomberg Television the potential for delays at the port east of London has prompted the supermarket giant to stockpile food and divert shipments to other terminals.

Felixstowe, the main U.K. port for shipping containers, is hiring extra staff to deal with a spike in volumes and shortage of storage space in the wake of the pandemic that’s expected to last into 2021, it said on its website.

“Felixstowe has been struggling with productivity problems for a while and on top of that, you have congestion at other major ports as the deadline for Brexit looms and companies try and stockpile,” said Duncan Buchanan, policy director at the Road Haulage Association, which represents U.K. truckers. “All these factors have come to a head. Come January, things will get even worse.”

Diaper Delays

The shipments surge is having an impact on costs. Some retailers are seeing week-on-week increases in shipping rates of 25%, Andrew Opie, director of food and sustainability at the British Retail Consortium, said in an e-mailed statement.

Jennie Potts, the co-founder of Mama Bamboo, which sells eco-friendly disposable diapers and wipes, said her container rates have risen to about 6,000 pounds ($8,002) from around 2,500 pounds a few weeks ago. A ship with one of her containers was only halfway through unloading when it had to sail and then return later, she said.

“We have really been struggling with our supply,” she said. “As a business we are having to have discussions about how much of these higher costs we can absorb before we need to pass them on to our customers.”

Other ports are also feeling the pinch.

A spokesman for DP World, operator of Southampton and London Gateway ports, said the pandemic, Brexit and the holidays were pressuring the supply-chain network. A spokesman for the Hull and Immingham container ports on England’s east coast said shipments were rising as logistics firms re-route deliveries away from the south.

The congestion at Felixstowe, owned by CK Hutchison, has prompted shipping lines MSC Mediterranean Shipping Co. and A.P. Moller-Maersk A/S, which jointly operate a trans-Atlantic container service, to move their U.K. stop to Liverpool from the week of Dec. 21.

“Global trade demand has picked up stronger than expected, causing a vessel, equipment and storage shortage globally across the supply chains, as well as bottlenecks in terminals and across inland services,” Maersk said in an email.

Danish logistics company DSV Panalpina A/S is also rerouting from Felixstowe to less-congested container ports, Jesper Hansen, executive vice president at DSV Road, said in an e-mailed statement.

Though COVID-19 and Brexit stockpiling had led to a surge in volumes and delays in truck crossings on the English Channel, the impact of the pandemic has worn off and normal transit times have resumed, he said.

Production Halt

While other car manufacturers in the U.K. haven’t so far followed Honda in halting output, a spokesman for BMW AG said the German luxury producer is planning for some parts supplies to take longer than usual.

Honda had said earlier it was trying to restart output as soon as possible at the Swindon site that employs more than 3,000 people and will close permanently next year. The company doesn’t plan to recover lost production this month, due to supplier constraints, it said in a memo to vendors seen by Bloomberg News.

Honda, like most automakers, operates a just-in-time system where parts from suppliers go straight into the factory and are installed in cars rolling down the assembly line. If just one component is missing, it can halt production. The firm is considering using air freight to move some of its critical parts.

Michael Gove, the U.K. cabinet minister in charge of Brexit negotiations, downplayed the extent to which Britain leaving the EU is responsible for Honda idling its factory.

“This primarily has to do with global factors,” he said in an LBC radio interview. “Inevitably at this time of year, you get people who want to stock up in their warehouses. And I think that there’ll be different reasons why people were doing that.”


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