Monday, January 28, 2019

Shipping: "Brexit boosts container ship rates as public, businesses stockpile goods"

Another knock-on effect: you have to assume inventory turns for the big four grocers are going to plummet after the flurry of activity exhausts itself.
From Platts' The Barrel blog, Jan. 23:
As the UK’s self-imposed Brexit deadline of March 29 looms, some market participants in the container shipping industry are bracing themselves for a boost in rates.

Hopes of more clarity on the future relationship between the UK and the EU were dashed after Prime Minister Theresa May lost a vote in the House of Commons on her negotiated deal with the EU on January 15, in the greatest defeat of a sitting government in UK history.

As a result, the container shipping market is eyeing support for all-inclusive freight rates and utilization of capacity on vessels along key head-haul routes to the UK, as importers seek to stockpile goods before this date.

The market has already seen some support in recent months, with November rates bearing much of the brunt. But a last-minute jump in demand remains likely in the market.

A sideways glance at the news on a near daily basis shows the British public squirreling away essential supplies. Members of Mumsnet, an online parenting forum, have been discussing their plans to stockpile medication, toiletries, tobacco and hair dye. The BBC ran an article on January 15 on “Brexit boxes” which cost upward of £300, spanning freeze-dried food, water purification and fire starting kits.

The hoarding seen in the cupboards and kitchens of households up and down the country has a parallel in the major shipping lanes.

UK supermarket giant Tesco announced on January 16 that it will be renting refrigerated containers to increase the amount of frozen goods it can stockpile to prevent disruption stemming from Brexit, further fueling this shopping frenzy.

Some importers are looking once again to the Far East to increase imports into the UK, in case there are issues regarding customs and product gets delayed at the coast. This has potential ramifications not only for UK-EU trade, but for trade from North Asia – UK and North Asia – North Continent (any port between Gibraltar and the Baltic Sea), with freight rates to the UK likely to price as a premium over rates to the continent should there be logistical issues to encounter along this route....