The European garment sector is increasingly concerned about how the six-day stranding of the 400-metre-long Ever Given cargo ship in the Suez Canal will affect its supply chain. It has also been assessing the lessons for future contingency plans regarding such cargo transport pinch-points.
Most garments imported into Europe reach the continent by ship, the majority in containers from Asia through the narrow Suez Canal, which is just 205 metres wide and links the Red Sea to the Mediterranean. The Ever Given became stuck on 23 March on its way to Rotterdam from Malaysia and was freed on 29 March.
Despite this success, ports and logistics companies across Europe are bracing for container traffic congestion as the hundreds of Europe-bound vessels that were stuck below the 193km long Suez Canal are all set to arrive simultaneously in the coming days.
Another wave of container ships is expected to arrive several days afterwards, when vessels that circumvented the logjam by rerouting via the Cape of Good Hope arrive. This route takes Asia to Europe traffic 26 days longer to arrive and pushes ships past the treacherous and sometimes dangerous waters south of the Cape, off South Africa.
Industry observers speaking to just-style.com predict the main impact on the European garment sector will be caused by the looming container congestion in European ports, delaying bookings for export containers that head back to Asia. This, in turn, means that the containers will not be in Asia when they are needed.
“The immediate impact of the Ever Given mishap is not going to be dramatic for the clothing supply chain, as the spring-summer collection had already arrived and is on its way to be distributed to retailers,” says Tanja Croonen, a spokeswoman for German clothing-makers’ association, GermanFashion.
“But the autumn-winter collection is due to be shipped out of China in May, and the containers needed for that might not be available in Chinese ports by then.”
Croonen adds the disruption also comes at a particularly sensitive time, given the upheaval caused by the Covid-19 pandemic to retail sales and associated supply chains. The latest data shows Germany’s clothing sales dropped by a whopping 50% year-on-year in January due to lockdown measures. Freight costs had already been hovering at high levels, owing to the global logistics sector suffering from manpower and container shortages caused by Covid-19 lockdowns that began in early 2020.
UK-based maritime research consultancy Drewry predicts there will now be a rush by companies to use air freight to avoid stock-outs, shipping capacity shortages and further increases in shipping transport costs. The cost to industry is hard to forecast, but “it will run into tens of millions of dollars,” Philip Damas, Drewry’s managing director – head of supply chain advisors, said in a note.
Unsurprisingly, the UK Fashion & Textile Association (UKFT) is growing uneasy, too.
“Huge amounts of fashion and textiles are moved around the world by ship and much of it passes through the Suez Canal,” says UKFT CEO Adam Mansell. “We can’t be precisely sure of the impact at this stage, but we are monitoring the situation closely.”
Ports across Europe are now preparing for the arrival of the container wave. Germany’s largest port Hamburg is in the process of renting an additional 100,000 square metres to store containers. Trucks bringing in containers loaded with export goods have been instructed to not arrive earlier than 48 hours prior to an exporting vessel’s arrival.
Similarly, the Port of Antwerp in Belgium has set up a seven day timeframe within which export containers for Middle East and Far East bound vessels are accepted. The Port of Piraeus in Greece has shifted to cargo handling on a 24-hour basis for as long as necessary.
The longer-term impact of the big backlog at the Suez Canal is still evolving, according to Nexxiot, a Switzerland-based company that places real-time tracking devices on containers to enable customers to navigate bottlenecks through last-minute adjustments.
Nexxiot’s co-founder Daniel MacGregor told just-style that additional capacity on so-called New Silk Road trains on rail routes augmented by China’s belt-and-road infrastructure investment policies remains too limited to make a mark on the problem. Meanwhile, air freight capacity also remains limited due to the suspension of passenger flights that usually carry the bulk of global air cargo flows in aircraft bellies.
Another contributor to the insufficient logistics capacity – making accidents such as the Ever Green blockage more damaging – is the shift towards more end-consumer freight “resulting from people ordering goods directly from China via online platforms,” MacGregor says. “For fashion, this leads to a speed-up of trend cycles, and whenever there is a supply side delay such as the one caused by Ever Given, the wholesalers and retailers get real problems with managing the trend cycles.”
MacGregor adds this is especially the case for companies that use vessels as floating warehouses, a move that has been accelerating in recent years amid the growing preference towards using ever-larger vessels. The Ever Given, for instance, can carry up to 20,000 containers.
The disruption caused by its running aground amidst high winds and a sandstorm is likely to be felt in the US as well as Europe. Satish Jindel, president of ShipMatrix, a Pennsylvania-based shipment technology provider, predicts that the delay in Europe-Asia container shipping will reduce the availability of ocean and air freight containers globally, which will also lead to higher costs for North American companies.
“Nevertheless, it is currently not the peak season for anyone in the clothing industry, so apparel-makers will probably not be willing to pay a premium for shifting from ocean to air freight,” Jindel says.
In the longer term, “the Ever Given fallout should lead to a shift away from very large vessels generally and to an extra charge for very large vessels at the Suez Canal specifically,” he adds.
Will the accident increase the pressure on European garment brands to increase near-shoring sourcing, to reduce their vulnerability to such logistics bottlenecks?
GermanFashion’s Croonen is not convinced that the Ever Green incident will push brands to buy more product in Eastern Europe and North Africa instead of Asia. “Eastern Europe suffers from a serious shortage of workers felt by industries across the sector, and even though there had been some talk in the past about bringing production to Northern Africa, latest data are not showing any momentum.”
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