Persistent global supply woes to worsen in UK by drivers’ shortage, new trade rules – CBA chief

LONDON (ICIS)–There is no end in sight to the sharp increases in container costs and delivery lead times that have dogged chemicals supply chains since the pandemic recovery phase began, according to the CEO of the UK’s distributors trade group the Chemical Business Association (CBA).

Tim Doggett added that the logistics woes are likely to further drive regionalisation in supply chains.

Driven by the gradual disintegration of formerly well-oiled supply lines as a result of extreme weather, lockdown measures, and the staggered and volatile recoveries by country and by region, the cost of shipping has risen more than tenfold in the last 12 months along some routes.

Sharply higher global shipping costs may be driving a retrenchment to more regional trade, in a bid to reduce costs but also have a greater chance of orders being delivered, said Doggett.

“During the last months, we have seen significant increases in container costs, plus increased lead times and general shortages in availability,” he said.

“While generally this is attributed to being a consequence of COVID-19, these factors are likely to continue for the foreseeable future and will ultimately lead to some changing in purchasing – perhaps buying closer to home and so reducing risk of disruption, and perhaps overall shipping costs,” he added.

VOLATILITY, DRIVER SHORTAGES
Doggett’s tenure as CBA’s CEO, started in May, comes at a volatile for chemicals distributors in the UK: globally, the impact of the pandemic is still felt, with widespread disruptions to supply chains; at home, the full weight of Brexit rules, assiduously applied by the EU27 since the start of 2021 and less so in the UK, according to Doggett’s predecessor Peter Newport.

Doggett has been active in drawing public attention to the shortage of heavy goods vehicle drivers, caused in part by Brexit reducing the available pool of overseas workers, but on a more chronic level by the declining  numbers of new employees joining the sector.

“If you look at the general demographics of HGV [heavy goods vehicle] drivers, they tend to be male and aged 55+ years. Below the age of 55, there are less and less through each age group, which illustrates that for as many as the last 30 years there has been an ever-increasing problem in recruitment,” he said.

“While pay is of course important, respect and recognition of this crucial role, importance and professionalism of HGV drivers must be improved.”

The CBA joined a wider cross-industry consensus calling for the UK government to act on the driver shortage by greenlighting emergency temporary visas to allow overseas workers to drive freight in and from the UK.

Ministers moved instead to relax health and safety rules dictating the maximum hours drivers can work, a move Doggett says has no prospect of alleviating the 60,000 worker shortage while making working conditions in the sector even less attractive.

“In terms of chemicals, while they represent a relatively small sector of the distribution industry, they have a disproportionate economic and social significance and we are working closely with Government and other stakeholders to find both short- and medium-term remedies, as well as long-term solutions to the problem of driver shortages,” he said.

SHIFTING TRADE RULES
Another priority for the CBA is help member companies adapt to the post-Brexit trade rules, which have made the sale of small volumes of product much more difficult, particularly after the decades of frictionless trade within the former EU28 (the UK officially left the bloc on 31 January 2021).

“The higher costs and additional transit times for smaller markets or shipments have led to some companies simply stopping doing them. For example, the entire margin on a smaller consignment may have been more than overtaken by the cost of customs clearance,” Doggett said.

“It’s then a commercial decision whether companies want to go for lower margin or higher sell price. Training and recruitment are a key consideration for all companies currently. While driver shortages may be creating the headlines, we’re also seeing similar situations across industries and at all levels.”

The new trade hurdles, which affect trade from the UK to Ireland as well as to the wider EU, are likely to shift the way UK trade works on a fundamental level.

Shipment sizes may increase to account for the associated costs and red tape, as opposed to more frequent small orders, according to Doggett.

“Prior to the [EU’s] Single Market, we saw a larger average size consignment, as this took in to account the longer transit times and administrational and customs costs,” he said.

“When the single market came into effect, we saw a significant increase in smaller ‘groupage’ shipments, and we can expect to see a return to larger part load and full load movements.”

PEAK SEASON APPROACHING
Supply chains have been rocked by weather issues such as droughts in China and freezing storms in Texas, along with human error such as the Suez Canal blockage, and quarantine and closures at ports in Asia on resurgent coronavirus infections.

The disruptions in the chain become more pronounced the longer the effects are felt, and Europe’s economic resurgence and the associated spike in industrial demand has only further strained those links.

While the manufacturing sector has been heating up for several months, with inflation rising in the UK and the eurozone along with it, August was one of the first months where supply constraints perceptibly dented the rates that producers across industries could operate at.

The demand is driving down inventory levels as players scramble to secure product, driving the UK to the most dramatic level of stock shortages in over 40 years, according to the country’s Confederation of British Industry (CBI).

The sharpest falls were seen in the plastics sector.

The situation is likely to be exacerbated further in the coming months, with the September peak season and the Christmas demand period both around the corner, and shortages already felt in the UK.

“Some of our immediate concerns are the increases in volumes as we approach peak season, typically from September onwards, when we see major spikes in demand for container space because of the seasonal demands of Christmas and winter,” Doggett said.

NEW MANAGEMENT
Doggett tenure as CBA’s CEO comes after stints at Clugston Distribution Services and Rhenus Logistics.

He has also had first-hand experience of industrial accidents, witnessing the explosion at Bosley Mill in northwest England in 2015.

“I was an eye-witness to the explosion and went immediately to the site, which was a scene of utter devastation, something that I still vividly remember and often think about. Four people were killed on that day and many seriously injured, including some of my friends,” said Doggett, who became a trustee of the Bosley Disaster Appeal Fund.

“The resulting fires took weeks to extinguish and one of the victims has never been found. The experience reinforced my already strong views on the importance of an uncompromising approach and commitment to continuous improvements in health and safety.

Front page picture: The UK’s port of Dover, a key trade link to the EU27
Source: Neil Hall/EPA-EFE/Shutterstock

Interview article by Tom Brown