Market Update – 24th February 2023

UK supermarkets have been a subject of debate this week after several stores were forced to ration sales of fresh produce. There are a lot of reasons for this, from weather-related disruption in Spain and North Africa, to rising energy costs for UK producers. Unfortunately, there are no quick fixes. 

The UK’s food supply is complex, and the nation is one of the most food-import dependent countries in the world. It produces over 50% of vegetables consumed domestically but only 16% of its fruit. Instead, its fruit supply is spread across the globe which in times of economic uncertainty comes at a high cost. 

This is made all the more complicated by Brexit, which requires suppliers to navigate new customs procedures and paperwork on items with a short shelf life. Lettuce, tomatoes and citrus fruits only last so long after all. 

Also, a lot of food supply chains rely on the just-in-time deliver method. Which means that instead of buying more stock than needed to prevent empty shelves, retailers will attempt to predict customer behaviours and buying habits. Naturally if they’re wrong, or something disrupts the supply, you see shortages. 

There are two immediate options for both the UK and their key suppliers here. First, increase domestic food production. Secondly, further diversify the nations where they receive imports from. How soon they can do either remains to be seen… 

In other news:     

Transportation trends        

Land:       

• Signs of stress are showing in the digital brokerage industry as numerous freight brokerages declare staff cutbacks, citing unfavourable market circumstances as the cause. 

• Uber Freight will soon be delivering electric-truck haulage as part of a pioneering EV pilot in California, run with help from EV road freight specialist WattEV. 

Air:    

• To the fullest extent possible, the African free trade deal (AfCFTA) must prioritise aviation, and air freight in particular. 

• To guarantee a better flow of traffic through terminals, two US industry organisations that primarily represent forwarders engaged in air freight want the government to provide financial support for advancements in this area. 

• It has been questioned whether the airfreight industry will be able to keep its current growth rate, meet growing e-commerce demand, and achieve 2050 net-zero goals. Some analysts, however, contend that the path has become too narrow and should instead concentrate on SAF.  

Sea:     

• As carryings and rates continued to decline throughout their networks, ocean carriers laid up close to 50 containerships in the past month alone.   

• The record number of new steel hulls entering the sea at a time when box fortunes are in decline marks the beginning of the containership newbuild avalanche, which will begin in earnest the following month.  

• It will take about three months to get operations back to normal at LimakPort Iskenderun, the Turkish cargo port severely damaged in this month’s megaquake, according to management.  

•   The biggest ports in China are becoming increasingly crowded with empty containers, and management at many facilities is now actively moving extra crates to auxiliary ports to make room. 

Industry news       

• As volumes continue to decline following the pandemic-related freight increase, the Pacific Merchant Shipping Association (PMSA) says that container dwell time at the San Pedro harbours, which include the ports of Long Beach and Los Angeles, is stabilising. 

• The £5.4 million initiative, which is scheduled for completion in the fall of 2024, seeks to create a domestic green transportation route between Aberdeen and the Orkney and Shetland Islands, with goods being transported on autonomous hydrogen-powered ships. 

• As people raced to buy more containers during the supply chain chaos of the pandemic, the number of metal boxes worldwide has reached new highs. 

• With west coast ports seeing the greatest drops, January import quantities at the ten busiest US container terminals decreased 17.9% from the record throughput of January 2017. 

• The viability of many rail freight operators in France is being threatened by increased electricity bills. Operators are calling for electricity contracts to be urgently renegotiated.  

Looking forward  

With supply chains a permanent part of the conversation at the moment, companies need to prevent as much disruption to their distribution (and manufacturing) as they can. The answer isn’t entirely by diversifying their supply chain. But it does help.