Brexit Logjams Force Freight Trains to Leave Goods at Port

U.K. freight trains are being forced to leave the country’s biggest container port without a full load, in the latest sign that stockpiling to prepare for Britain’s break with the European Union is disrupting supply chains already strained by the coronavirus outbreak.

Some trains normally packed with everything from phones to the latest fashions are departing Felixstowe east of London without a portion of their consignments, in order to keep to allocated time slots and avoid performance fines, according to a person familiar with the situation who asked not to be named. Heavy volume combined with some delayed shipments have overwhelmed the port’s ability to keep up with container transfers.

The failure to fill trains completely at Felixstowe could have a knock-on effect for consumers across central and northern Britain, which rely more on rail to deliver goods than locations to the south such as London. Truck traffic at Dover, the U.K.’s biggest ferry port, is already experiencing mounting disruption in the thick of the holiday season.

Brexit Threat

The likelihood that the Brexit transition period will end on Dec. 31 without a trade accord rose on Friday after Prime Minister Boris Johnson warned that a no-deal split is “very, very likely.” That would mean the return of tariffs and quotas, alongside the prospect of even worse delays at the border as new paperwork requirements come into effect.

Brexit Logjams Force Freight Trains to Leave Goods at Port

The failure to agree divorce terms has spurred companies to stock up before the deadline, fueling goods flows already being driven by the year-end holidays and efforts to rebuild inventories following pandemic lockdowns. Inc. recommended to sellers that shipments between the U.K. and EU be sent before Dec. 18 “to ensure they cross the U.K. border before customs clearance is required.” The online retail giant said it will stop cross-border transshipments from that day.

Dover Back-Ups

The surge has already created traffic disruption on both sides of the English Channel, with snarl-ups initially focused on Dover, spreading to container terminals like Felixstowe which mainly handle goods from Asia and which had been expected to ride out the transition largely unscathed.

“The disruption has been significant, but we are working closely with the port to address it,” Julie Garn, head of intermodal services at GB Railfreight, one of Britain’s three main rail-cargo carriers, said in an interview.

Brexit Logjams Force Freight Trains to Leave Goods at Port

Felixstowe, owned by CK Hutchison, is hiring extra staff to deal with a spike in volumes and a shortage of storage space that’s expected to last into 2021, it said on its website. Still, congestion is so acute that container lines MSC Mediterranean Shipping Co. and A.P. Moller-Maersk A/S will move the U.K. stop on a joint trans-Atlantic service to Liverpool from Dec. 21.

More Trains

While freight trains have been affected by the crunch, they may also hold the key to clearing backlogs if frequencies can be increased. Felixstowe has set up a working group with the aim of increasing the number of daily train movements from 36 round-trips to 42, Garn said by email.

GB Railfreight has also seen a surge in queries from a wide range of companies looking to avoid a possible Brexit meltdown in Dover by switching shipments to sea containers, according to John Smith, the firm’s managing director.

Other companies are looking at transporting cargo by rail directly from continental Europe through the Channel Tunnel into a freight interchange at Barking, London, he said.

Container rates are meanwhile climbing as a result of surging demand, with data from maritime research consultancy Drewry showing that the average rate for a 40-foot dry container from Shanghai jumped to $4,100 last month, a 140% year-on-year increase. That compares with just $2,290 for sending the equivalent box from China to Rotterdam.

About 20% of companies that are “desperate for goods” will be paying far more than the average fee for guaranteed deliveries, said Simon Heaney’s Drewry’s senior manager for container research.

Other container ports are also being affected. DP World, operator of the Southampton and London Gateway terminals said the pandemic, Brexit and the holidays are pressuring the supply-chain network, while Hull and Immingham on England’s east coast report a jump in shipments as logistics firms re-route away from the Channel.

©2020 Bloomberg L.P.

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