THE biggest issue facing the UK is ocean freight from Asia and the Asia-UK is the UK's largest trade lane and anything which destabilises that is going to affect everyone in the supply chain, right down to the most normal everyday activity, like a trip to buy a set of garden furniture or a barbeque.

Everyone in logistics knew that the accident in the Suez in late March involving the Ever Given vessel would cause turbulence for a month or so, but no one thought that freight rates would continue to climb, even after 3 months - but they have, reports London's The Loadstar in a commentary.

Currently a 20-foot container from Shanghai to Felixstowe will cost a hard-pressed importer around US$8-9,000 as the supply-demand equation has for once, fallen in the lines' favour. No one in logistics, be that forwarders or importers can really get their head around paying $17,000 for FEU cube but it's here and reports suggest it'll hit $20,000 by July. Crazy, right? It seems like a fairy tale but 13-14 months ago, the market rate from Shanghai was around $800 for a TEU general purpose container (GP) and many large importers paid less.

The most glaringly obvious solution would appear to be for the shipping lines to lay on more services (creating more capacity) and get things back to something manageable for importers, However, there seems to be scant evidence of that happening and reports suggest that the lines are signing fewer long-term contracts and pushing customers, large and small towards the erratic and extortionate spot market

What is worrying is that UK importers surely cannot continue to pay these outrageous freight costs as their margins are being decimated and if they're supplying a major UK retailer for example, they may be locked into a restrictive annual contract on price and delivery so they just have to keep on burning cash and hope freight rates will fall. They won't, not yet anyway.

The problem is that although the lines shouldn't want to "kill the goose" it seems they have no regard for their direct customers (predominantly the freight forwarders) most of whom will have partnered with them for many years on a core carrier basis.

The serious concern is that with the lines' attitude to their customers apparently hardening, and the beginning of Peak Season 2021 starting in August, only four - five weeks away, many in the industry see little chance of a respite in rates until after Chinese New Year 2022 and by that time it's feared that many small and medium sized importers will run out of cash, gone bust and in the process seriously expose many UK forwarders (who have already had to massively increase their credit exposure to these customers).

It's a sad day when the UK government is most likely completely unaware or disinterested in what is happening in the real world of business and our supply chains, maybe thinking that "it's just a market" because many forwarders and importers alike actually feel that what we're really witnessing here is a complete abuse of market position by the lines