Industry Review: Testing Times for Freight Companies in Ireland

Testing Times for Freight Companies in Ireland

“If you catch a dragon by the tail are you going to try and control him or hang on and enjoy the ride?” asks Mark Tracey, the Commercial Director of Ace Express Freight. “Because that’s literally what’s going in the logistics/international freight industry, it’s a perfect storm.” Terry Allen, cofounder, owner and director of Hawthorn Logistics, agrees. “It is unbelievably challenging and I think it’s going to get even more so … I don’t see any light at the end of this particular tunnel – but knowing our luck, when we do it will probably be an oncoming train.”

Both companies are involved in freight forwarding and customs clearance, which is keeping them very busy. ‘We’ve had a boom year, primarily with clients in the pharmaceutical and medical devices area fulfilling orders for items such as ventilators and antibiotics across the world,” says Allen. “The downside of that is that we’ve had to do a lot of remote working and it has been difficult to hire additional experienced people. That said, our staff have been incredible in terms of the way they put their shoulder to the wheel and made sure we continued to deliver the services. So for us it’s been both a good time and a worrying time.”

“We were originally established 32 years ago as a customs clearing agent and it’s in our DNA, so while there are issues, complications and challenges, we’re actually better placed than most to counteract them,” says Tracey. “We had to change very quickly from an office-based collaborative environment to a situation where everyone was working from home. Now we’ve even got people working from Poland and Malta. We’ve also employed 25 additional staff, mostly to deal with administration, just to try and get over the hump.”

That “hump” is big, with a number of problems piling one on top of another to drive freight prices through the roof. Internationally well over 80% of all freight is transported by sea. But high levels of demand, primarily due to the pandemic, have been compounded by such issues as severe congestion at ports around the world, port closures in China due to COVID, and even a large container ship blocking the Suez Canal and another recently damaging two cranes at Taiwan’s largest port.

One of the knock-on effects of this “perfect storm” has been a significant shortfall in the availability of containers worldwide. “You’d need to put nearly twice as many containers into the system as is currently available, so obviously that problems is not going to be cured anytime soon,” says Tracey.

Mark Tracey, Ace Express

Rates rocket

Internationally, the picture is stark. A few examples illustrate this. Twelve months ago Hapag Lloyd was charging around $3,500 to transport a 40 foot container from Asia to California. It is now charging $25,000 dollars, including a ‘capacity surcharge’ of $5,000 dollars. A container into Europe from Asia, which was about $3,000 dollars in January 2020, is now running at $16,000. A container from Asia into Ireland which cost $2,200 18 months ago is now costing $15,000.

Nor does switching to airfreight represent a viable alternative. About 80% of all air freight is carried in the holds of passenger aircraft. Airlines are beginning to fly again, resulting in some increase in capacity and companies with higher value items are switching business to air. But with capacity still constrained that has caused air freight rates to rise exponentially, too.

“I have a major client who for the last two weeks hasn’t been able to get an order confirmed. But in those two weeks the rates to transport the goods have increased by 30%,” Allen says. Another client had agreed a shipment into Ireland from California at a rate of $3 a kilo. “We received an email over the weekend to say that rate was now $4.75 and asking us to confirm we’re OK with that.” Nor do Allen or Tracey see any signs in the near future of an end to this upward trend. “The pressure is on. The upshot is going to be at least medium term. We’re looking at these rates sustaining into 2022 and possibly longer,” Allen warns.

Terry Allen, Hawthorn Logistics

… and there’s also Brexit

For Ireland in particular there are also the problems caused by Brexit, the reluctance of European drivers to use the UK landbridge because of the near endless paperwork delays, and a general shortage of drivers. These issues have resulted in an uplift in Irish/UK shipping rates of between 20% – 25%.

“Brexit has been a complete nightmare,” says Allen. “The result can be seen in bare shelves in some supermarkets and longer lead times on goods all round. Furthermore, the complications of Brexit are going to continue to cause havoc in the market for at least the next six months and when the derogations are removed we’re going to see further upheaval.”

Not pulling his punches, he describes Brexit as “the worst decision that any country has ever made” in terms of trade and industry. “For all of the bluff and bluster that’s coming out of the British government it’s clear that it’s an unmitigated disaster from their point of view,” he adds.

The problem is primarily one of increased complexity. A container arriving in Ireland from China or the US will usually contain a single product requiring a single clearance. Even multi-line or multi-product containers are relatively straightforward. But with the large amount of foodstuffs and agricultural products coming into Ireland from Britain a truck could easily contain 200 or 300 different products for delivery to a store or supermarket. Each of these needs to be cleared individually, creating an enormous amount of work that was not previously necessary and consequent long delays at ports.

“At this stage lorry drivers are fed up going into the UK because the infrastructure is struggling to cope,” says Tracey. “They’re happy to run right across Europe, from Norway to Italy, but they’re reluctant to go through the UK.” As of now, it is estimated, the UK itself is short about 100,000 drivers. On top of that, because world has been closed down for 18 months, there has been no driver training or testing so there are no new commercial vehicle drivers to help fill the shortfall. Allen points out that the driver shortage is exacerbated by new rules on driver hours and breaks which requires an immediate 20% increase in the number of drivers needed to provide the same level of service.

Is there any solution?

The solution for companies is to maximize the supply chains and with the help of their selected freight forwarder to consolidate their logistics with other companies wherever possible. Depending on the size of the pallet, a container could typically take about 25 pallets. “ So three or four companies might work together to assemble a single order of 25 pallets to reduce their costs,” Allen says, cautioning “that’s a lot easier said than done.”

Tracey says the Irish are very resilient and will adapt to the challenges. He points out that there is a shift of business to mainland Europe, with some companies avoiding the complexities of doing business with the UK supply chain by switching up to 100% of their business to European suppliers.

He also advocates a “buy early, buy often” approach. “Give yourself a bit of breathing space to have the paperwork right,” he suggests. “Once you’ve done it a few times you’ll get into the groove and it becomes manageable. But planning, planning and more planning is what is needed now, whether you’re importing or exporting.” Use the expertise of a freight forwarder to make the best of a bad situation, recommends Allen. “We’re constantly in discussion with the shipping lines, the airlines and the road freight carriers, as well as with our colleagues in China, Asia, the US, Canada and Australia. So we understand what the issues are and we can alert customer to exactly what they need to do and how they need to do it. Thankfully customers are listening and the more we can help them to understand and to adjust their expectations, their scheduling and their forecasts, the better.

“The problems are going to continue, certainly for the rest of 2021. But it’s up to companies like us , as well as the much bigger logistics companies like the DHLs, to figure out how we can assist customers, shippers and importers to mitigate some of these problems and how we can alleviate some of the stresses, even if we can’t alleviate the costs.”

Tracey concludes: “You do adapt to the environment around you and the Irish flexibility in the face of a challenge is brilliant. I can see people getting stronger and better because of what’s going on. You either love this business or you hate it – there’s no in between. And at times like this you have to show your true steel.”