More supply chain volatility on the horizon, experts warn
THE GAPING fissure that lies between air and sea transport employees and their bosses is being made even more stark by the latest string of record-breaking second-quarter 2022 financial results declarations.
Profits and revenues may be on the up but, at the same time, job and pay satisfaction is in serious decline, writes Thelma Etim.
This imbalance appears to be increasing as each passing week heralds yet another round of workforce pay-level negotiations between staff representatives and business owners. It is a situation which is threatening to undermine global supply chains and which will continue to significantly disrupt air, rail, road and sea shipment flows — whilst also keeping airfreight prices volatile.
For example, in a UK dispute over pay, some 1,900 Unite union members who work at Felixstowe, the nation’s largest container port, began eight days of industrial action on 21 August. A Unite statement confirmed: “Talks at the Advisory, Conciliation and Arbitration Service (ACAS) failed to reach a satisfactory conclusion after the employer, the Felixstowe Dock and Railway Company, failed to improve on its offer of a seven per cent pay increase, which is significantly below the real inflation rate of 11.8 per cent. Industrial relations were already strained as, last year, workers only received a 1.4 per cent, below inflation, increase.”
In a sharp response, ports operator the Felixstowe Dock and Railway Company, retorted: “The company is disappointed that Unite has not taken up our offer to call off the strike and come to the table for constructive discussions to find a resolution.
“We recognise these are difficult times but, in a slowing economy, we believe that the company’s offer, worth over eight per cent on average in the current year and closer to 10 per cent for lower paid workers, is fair. Unite has failed our employees by not consulting them on the offer and, as a result, they have been put in a position where they will lose pay by going on strike,” the company insisted.
The port advises that the strike action will inevitably damage UK supply chains. “We are grateful for the support we have had from our [supply chain] customers and are working with them to mitigate disruption. The port provides secure and well-paid employment and there will be no winners from this unnecessary industrial action.”
After the announcement of the industrial action, logistics giant AP Moller stressed that, in response, its daughter company Maersk is targeting ‘optimum visibility’ on the situation in order for customers to effectively plan and manage their supply chains. “Since our last communication, we understand that talks between Hutchinson Ports [the operator of Felixstowe Port] and the Unite union have not resumed. As such, the planned strike action from Sunday 21 to Monday 29 August is set to go ahead.”
The Maersk statement acknowledges that the circumstances may change at short notice and advises customers: “We will be sure to keep you updated as soon as we know anything further. Our teams are working hard to establish a number of contingency measures to minimise the impact of strike action on our customers, including changes to the vessel line-up; as well as to maximise available labour immediately before and after the strike. A number of vessel ETAs have already been advanced or delayed,” it points out.
Josh Brazil, vice-president of global supply chain insights at United States supply chain monitor Project44, forewarns that strike action at Felixstowe could have “massive implications” for the nation’s supply chains. “The pandemic-related cobwebs are yet to be shaken off, so disruptions such as strike action could rapidly reverse the recent recovery. We are already seeing vessels and shipments avoiding the port with vessel TEU capacity dropping by a whopping 37.6 per cent compared to last week — and this is only day 1,” he says.
“Felixstowe is a global port — the longer the strike lasts, the larger the ripple effect on container flows and carrier performance around the world.
The Felixstowe strike is already causing vessels to redirect to nearby London Gateway, with a 45 per cent increase in vessel capacity volumes calling at that alternative port in the last week. “If the [strike] action continues, we may start to see the impact on consumer goods. At a time when UK businesses are facing rising costs and reduced consumer demand due to inflation, supply chain issues could spell disaster for many beleaguered companies,” the monitor warns.
Elsewhere, in England’s north west region, more than 500 Liverpool container port staff have also decided to strike over what they claim is an ‘ inadequate’ seven per cent pay offer — and the failure of the port operator to honour a 2021 pay agreement. “This includes the company not undertaking a promised pay review, which last happened in 1995, and failing to deliver on an agreement to improve shift rotas,” the union argues.
In a ballot with an 88 per cent turnout, some 99 per cent of respondents voted for Liverpool strike action. “The strikes, the dates of which have not yet been set, will bring the container port, one of the largest in the country, grinding to a halt,” it insists.
Such unrest is becoming a widespread issue. A survey carried out by watchdog Logistics UK has revealed that a recent survey completed by 165 of its members in 12 logistics business sectors demonstrated that the country’s overall logistics industry is struggling with inflated prices. Furthermore, some 82 per cent of respondents expect the cost of transporting goods to climb even further in the third quarter of this year.
Sarah Watkins, deputy director of policy information at Logistics UK, notes that operating costs are continuing to rise substantially. “As a result, freight rates across all modes are predicted to increase in the third-quarter of 2022,” she says.
It comes as no surprise that airfreight pricing monitor and analyst CLIVE Data Services reports that seasonally adjusted general air cargo market performance data for July shows a continuing slowing down of volume, load factor, capacity and airfreight rates, as the impact of economic and political uncertainties on world trade continue to hang over the entire industry.
In comparison with the 2021 equivalent, air cargo volumes dropped by nine per cent in the first month of the third-quarter 2022 period. Demand was also down by nine per cent versus the same month of 2019. Capacity growth slowed to just four per cent over the July 2021 level and was minus 11 per cent to July 2019, says a statement.
This development caused CLIVE’S unique load factor measurement to drop by eight percentage points year-over-year to 58 per cent. Niall van de Wouw, founder of CLIVE, also acknowledges that the March 2022 slowdown in the global air cargo market is ongoing. “There are many dark clouds hanging over the air cargo industry given the state of the world right now,” he says. “Volumes are subdued, and while air cargo rates are still elevated, they are [nevertheless] slowly but surely easing back towards pre-COVID levels,” he adds.
From an airfreight rates perspective, current indicators suggest that the market has yet to bottom out. “It’s clear that airlines are following the market very closely to ensure they are deploying their assets in the best possible way because the market is moving quickly. We have already seen freighters moving away from transatlantic routes,” Van de Wouw adds.
“The slow slides in rates compared to 2019 and 2021 continues by a handful of percentages each month,” he reveals. “In January, rates were +156 per cent compared to the same month in 2019. Now this figure is 121 per cent, or a reduction of 35 percentage points on a global scale.
“On the Atlantic [trade lane], the decline in general airfreight rates we reported for the previous three months of 2022 continued in July. Whilst this will be partly seasonal, the slight increase in load factor across the Atlantic relative to June — from 58 to 61 per cent — might be a result of carriers and forwarders redirecting their freighter operations to other lanes, hence pushing up the load factor for the remaining flights on these routes,” he suggests.
Read more stories here
Originally published at https://aircargoeye.com on August 22, 2022.
