Felixstowe surcharge announced as congestion continues

Forwarders expect that other carriers will follow suit in charging extra fees due to higher operational costs currently at the UK’s largest container port and expect the situation’s impact to spread to other UK ports

With congestion issues continuing at the UK’s largest container port, Felixstowe, one container line has said it will be implementing a Port Congestion Surcharge of US$150 per teu for Felixstowe from the start of next month, with others expected to follow.

In a note to customers this week, CMA CGM said that “due to a combination of factors, including significant increase in import container arrivals, reduced terminal productivity due to Covid-safe working practices, and the deep cleaning required at each shift changeover, and reduced driver availability in the container sector, the operational costs have significantly increased in Felixstowe terminal over the past weeks”.

As a result, CMA CGM will be implementing a Port Congestion Surcharge of US$150 per teu for imports and exports to and from Asia via Felixstowe on its FAL (French Asia Line) services from 1 October, until further notice.

Freight forwarders expect that other carriers are likely to follow by adding their own surcharges, and also expect the situation’s impact to spread to other UK ports.

Although the port said last week that it was taking measures to improve service levels, which included increasing its vehicle booking system availability to more than 4,300 vehicles a day, Rue reported that booking slots are still substantially reduced, with even the biggest operators receiving less than 50% of their usual allocation.

“Maersk, OOCL and other carriers have warned customers of delays discharging containers from vessels and longer turnaround times for trucks, as well as import containers missing rail connections and some vessels have already diverted to Southampton or London Gateway,” he added.

Other carriers set to follow

And after receiving notification from CMA CGM of its Port Congestion Surcharge, Rue said: “It is likely and must be anticipated that other carriers will follow suit.”

He promised to keep customers informed of developments as they occur but warned that “with merchant haulage already overstretched, the additional pressures of demand switching to Southampton and London Gateway is likely to lead to disruption as these hubs are unprepared for the additional volumes coming their way.”

He added: “We are monitoring developments across all ports and will continue to work closely with our customers to find solutions and alternative options, as appropriate.”

Criticism from customers

As reported earlier this week, Felixstowe, is facing criticism from shippers and freight forwarders after announcing it would no longer accept empty containers due to congestion, or would reduce the number of empty containers being returned to the port by rail and road.

Robert Keen, director-general of the British International Freight Association (BIFA), said the operational performance at Felixstowe had been very challenging for some time, but the issues had escalated at the end of last week. He said the latest initiative appeared to be “an attempt to overcome the huge congestion that has developed at the port, which has led to significant haulage problems for our members whereby many containers can neither be collected, nor returned”.

Forwarders were told last week that they can no longer return empty containers to the port until 23 September, although it was unclear at the time of writing whether this situation had changed. BIFA noted that delivering empties to inland container parks would increase haulage costs for its members and lead to higher quay rent and demurrage issues and expenses, “which are difficult to pass on to our members’ customers”.

Keen said forwarders were reporting that the port’s operator had been unresponsive to the issues they had raised.

Longer-term challenges

Felixstowe has faced several challenges in recent times, and struggled to recover from the failed installation of a new terminal operating system (TOS) in 2018. Keen suggested that the current issues link back to those problems, noting: “The debacle in 2018, when the port undertook a disastrous migration to a new in-house terminal operating system appears to be at the root of the current VBS (vehicle booking system) problems, which is exacerbating the congestion problems caused by other issues – including a huge increase in container moves ahead of the Golden Week in China, reduced container moves per hour at the quayside, and serious staffing issues.”

He said BIFA members had suffered from two years of poor service from the port, claiming it was now time that its operator “considers BIFA members as direct customers of the port, and shows some willingness to discuss compensation for the damage caused and the increased costs that have been incurred by those members. At the very least, the port authority should extend free-time for quay rent and demurrage.”

Spike in import volumes

Sources close to the port, however, say that the current issues are not related to the TOS.

In a statement published late last week on its website, Felixstowe – which is owned by Hong Kong-based Hutchison – said it was “experiencing a high demand for both road and rail capacity”, adding: “The situation has been caused by a sharp spike in import container volumes, along with a high proportion of late vessel arrivals. The weekly import volume for the last two weeks has been over 30% higher than average levels.”

This was exacerbated by unusually high levels of empty containers at the port and the impact of the ongoing Covid-19 crisis on resource availability, it added. In order to bring performance levels back, Felixstowe would increase vehicle book system slots to 4,300 per day and open on Sunday for haulage collection. But it said it would “temporarily slow down and reduce the number of empty containers being returned to the port by rail and road”, to ensure it did not run out of storage space.

Other measures would include the recruitment and training of 100 equipment drivers, which had not been possible during the lockdown, the port said.

The congestion issues come at a difficult time for ports, which are trying to recover from the impact of the pandemic. After losing large amounts of volumes, and revenues during the peak of the crisis, they are now facing a sudden resurgence of demand during the peak season. But at the same time, terminals are faced with container lines leaving empties on the dock as they rush to meet schedules.

Staffing has also become more difficult as training had to be reduced during the pandemic, as close-quarters one-to-one training could not be done safely. There are also concerns that freight forwarders are making resource planning even more difficult by bulk booking vehicle booking slots they don’t need then releasing them at the last minute, meaning that other forwarders or shippers do not have time to take up the slot.

In the meantime, freight forwarders have reported carriers advising them to switch any export bookings to other UK container ports, notably either London Gateway or Southampton.

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