UK port congestion spreading to warehouse sector

As Asia ‘reopens’ following the outbreak of the Coronavirus, exports are reaching their destinations to find countries in lockdown with little capacity or demand.

The UK has the second biggest port industry in Europe and handled approximately 476m tonnes of freight in the year ending June 30, 2019. However, about three weeks into the UK’s lockdown the British Ports Association noted ports were under pressure financially and in terms of low demand. Ports were having to offer rent holidays as well as reduced rates as maritime activity declined. It is thought that the UK’s port volumes fell by around 30% in March 2020. The issues of low activity are subsiding, and attention is starting to turn to congestion after Asia starts exporting again.

Asia restarted manufacturing and exporting goods from early April whilst much of Europe remained in lockdown. As predicted, this has resulted in accumulations at cargo port terminals, distribution centres and warehouses around the UK. It was reported in early May that latest estimates believe 90% of the UK’s warehouse capacity is full and the UK Warehousing Association forecasted that there would be no available space by mid-May at the earliest. The main concerns are coming from the holding facilities. Questions are arising as to how they are to handle the increased volume as medical equipment and food remain a priority.

Demand is a huge factor in this case as the UK’s lockdown policy has meant demand has almost disappeared whilst supply from the East increases. The BBC reported that total UK retail sales fell by 4.3% in March 2020 compared to March 2019. The British Retail Consortium has said this is the sharpest decline since 1995. Demand for consumer goods, along with things such as building supplies, oil and petroleum products have all been in decline as lockdown prohibits many everyday activities, from shopping to driving. With many retail outlets closed, industries shutdown and millions of people at home, many facilities have become backlogged.

The congestion which started at ports spread into all kinds of warehousing facilities as stock mounted up. This capacity crunch, however, is not a long-term issue, many orders have been cancelled during the lockdown the port industry could see low activity and warehouses should see capacity issues ease as demand returns. On a positive note, the UK is expecting some restrictions to be eased in the next few weeks which may mean some alleviation for these congested facilities as retail outlets open and travel is permitted.

Source: Transport Intelligence, 07 May 2020

Author: Holly Stewart