Woodland Ireland Quarterly Supply Chain Report – Q2/22

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Following Woodland Group Ireland’s first 2022 quarterly supply chain report, published in April, the company is reviewing the current supply chain landscape and reviewing the change in trends that have occurred as the year has progressed from April through to June 2022.

Q1 was an extremely mixed period for the global supply chain – COVID-19, mass congestion and the Ukraine-Russia conflict. To some extent, Q2 could equally be summed up by those same disruptors, the knock-on effects coupled with continued strict COVID-19 precautions in Asia resulting in Q2/22 being very much the same in its unpredictability, however, it did show a little more stability and positivity with import and export trends generally moving on an upward trend with demand and capacity increasing.

Q2 saw the rollout begin for our very own 360 digital supply chain management platform, Woodland Online. Able to deliver real time information on quoting and booking, carbon reporting, tracking and PO management, amongst other features, the platform has seen positive feedback from clients within the Irish import/export market in what has been a somewhat uncertain period for many businesses relying on their goods being shipped.

With an increase in interest from Irish businesses around the field of sustainability and carbon reporting for their supply chains, the Woodland Online tool also allows businesses to track the emissions along their route with a multimodal breakdown, allowing for accurate and efficient ESG reporting.

The trend in near-sourcing from Q1 is yet to subside, with more businesses now looking to spread risks and have contingencies in place to ensure that they have continuity of supply and shelves will not be left empty. The lessons learnt in recent times have most definitely fuelled a move away from single-sourcing.

Kevin Brady, Managing Director of Woodland Ireland, commented: “At the start of the second quarter, it was nigh on impossible to predict where we would be as we moved towards Q3, with COVID-19 still very much a threat to the Asia supply chain, the Ukraine conflict ongoing, the USA experiencing heavy West Coast congestion and a whole plethora of drivers pushing up costs at all stages of the chain.

It has by no means been an easy quarter, with rising domestic costs and inflation hitting the consumer’s wallet, but the resilience and versatility shown by Irish businesses has been nothing short of admirable to manoeuvre past these obstacles in order to create an Irish supply chain that is as reliable as it possibly can be.”

 Ireland Overview

Despite the continued cost of living and fuel crises, Ireland’s unadjusted import and export figures saw healthy year on year growth whilst also seeing improvement over the first quarter.

That said, Ireland’s inflation rate hit 9.1% in June 2022, a 38-year high with transportation costs rising at a rate of 20.4% (Trading Economics). During the second quarter, fuel and utility price rises proved cost absorption to be uneconomic, prompting many businesses to implement, or increase previously implemented, fuel surcharges as the price of petrol hit €2.17 per litre in June 2022 with diesel pushing the €2.15 per litre mark.

The typical Irish consumer has also changed their behaviour, as prices of everyday goods rose (Fig. 1) month-on-month retail sales dropped 1.3% in May and June following a brief +3.6% surge in April. Although not necessarily big numbers, this does in fact show a steady improvement from H2 2021, although consumer confidence hit a low in May 2022 at 55.2 points, compared to 81.9 in January  

Price increases have been seen at all stages of the supply chain, including across shipping lines and carriers as global average bunker prices hit a 2022 high on 10th June at over 1,100 USD per metric tonne (2022 Bunker prices, source Ship and Bunker) whilst crude oil almost reached $123 per barrel on 31st May, lower than March’s Q1 peak although Q2’s sustained prices held much higher

 Import and export trends

The latest unadjusted figures from the Central Statistics Office Ireland (CSO), published in July, show a positive trend for Irish trade with exports growing from €40.7 billion to €53.2 billion for Q2 when compared to the same period in 2021. Looking at the same comparison period, imports saw an increase of just over €10 billion to an overall Q2 value of €36.7 billion. The Q2 period also followed the trends of Q1, with medical and pharmaceutical products and mineral fuels being the top commodities both imported to and exported from Ireland. An emerging export trend was that of electrical machinery as well as food and livestock, all seeing 21% growth, whilst specialised machinery (used in specific industrial settings) grew by a staggering 285% in June, which would indicate production and manufacturing growth in Ireland.

Trade with Great Britain has seen an astronomical increase on 2021’s numbers, with imports from GB for the first half of 2022 growing by 72% to €11.44 billion and exports rising by 33% to €8.84 billion. To put it into context, Q2/22 has seen a €3.36 billion growth in GB imports vs Q2/21 levels, whilst exports have risen by €1.36 billion for the same period. It must be noted, however, that a reasonable proportion of the increase in import value from the United Kingdom can be accounted for by inflation.

Irish Port Update 

Dublin
It was reported by Dublin Port Chief Executive, Eamonn O’Reilly, that trade volumes have near-on recovered to both pre-pandemic and pre-Brexit levels. In a recent release following the publication of H1 trading results, O’Reilly stated that it is now possible to begin assessing trends following the past two years of Brexit and COVID-19 disruptions.

Port volumes for the first half of 2022 grew by just over 10% to 18.6 million gross tonnes as the number of vessels berthing increased by 150 to around 3,700 against the same period in 2021. The increase comes as a result of two well-performing quarters, with volumes up 7.0% in Q2/22.

Although overall port tonnage is -3.7% down from 2019, petroleum imports are 4.3% ahead of where they were in H1 2019.

Cork
At a cost of €86 million the new Cork Terminal, which began operating in April 2022, marks the largest investment into any Irish port in the past 100 years and the largest in Cork’s history. The aim of the new terminal, situated in Ringaskiddy, is to enable both local and national economic growth whilst delivering more efficient container handling facilities.

The port will predominantly handle the Cork to USA routing, in addition to a weekly Costa Rican service in its initial opening phase. 

Warehousing

Warehousing is an industry currently worth over €860 million in the Irish market and it has seen limited space and high costs become the main trend through the first half of 2022. Capacity has been a contentious issue in the Irish supply chain throughout H1, with warehousing space hard to come by, and any availability coming in at a premium. This has been down to a combination of increased building and rental costs and COVID-time overstocking by companies using the “just-in-case rather than just-in-time” approach throughout the pandemic. Furthermore, the conflict in Ukraine led to a shortage of some building materials and led to a slowdown in construction.

Updates by Region

The Ukraine Conflict’s effects on Irish businesses

Our thoughts continue to go out to those affected directly by the Ukraine conflict, and thank all of the businesses from Ireland and beyond for their efforts in aiding civilians and refugees.

There have been some economic ramifications for Ireland in the wake of the ongoing conflict, with energy and commodity price increases being seen at all stages of the supply chain. However, Ireland has minimal direct trade links with Ukraine and Russia with Russia accounting for just 0.3% of exports and 0.6% of imports, whilst Ukraine makes up just 0.06% of Irish exports and 0.07% of imports (Source: Centralbank). Although the overall trade links affected may be minimal, for some specific goods there have been a greater effect, such as Russian coal, coke and briquettes which account for 65% of Ireland’s coal imports and fertiliser of which one quarter comes from Russian. The combination of fertiliser shortages and the fact that 13% of Ireland’s maize imports come from Ukraine led to resultant food cost increases whilst other goods used in industries such as construction either saw price hikes or unavailability.

Asia
Much of the Asian continent saw continued disruption from COVID-19 and its variants into Q2, with heavy restrictions and lockdowns still commonplace, a factor which had global knock-on effects in addition to hindering any opportunity to recover to pre-pandemic levels.

Ireland – China Trade Figures
(Source: Central Statistics Office, July 2022)

Second quarter Chinese imports grew heavily when compared with Q1 numbers, from €2.87 billion to € 4.56 billion, as they also saw a dramatic increase from the same period in 2021 whilst growing around €500 million each month throughout Q2. Exports to China also saw an increase, albeit at a slower rate, to €3.88 billion. 

China Supply Chain Overview
Worst affected by COVID with a significant impact on the supply chain was China, a key exporter and global manufacturer of ‘affordable goods’ which had seen prices surge and become less competitive due to the pandemic. Within China, we saw Shanghai hit hardest by outbreaks, resulting in a partial lockdown in March which evolved to become a full lockdown through April and May. Production in the region only began to slowly restart in June as demand also increased.

Whilst air freight to and from Shanghai came to an almost complete halt, ocean freight was affected in the most part by heavily reduced trucking capacity resulting in factories not being able to move goods to port in addition to raw materials not being able to reach factories in the first place. This meant that the factories, which were already struggling with restrictions and labour shortages, were unable to produce goods due to a lack of materials or lack of storage.

The knock-on effect of this was an overall drop in global export numbers, despite the total TEU count not seeing a significant decrease as barges were able to compensate for some of the lost trucking capacity.

This chain of events led to ocean rates beginning their decline as carriers struggled to meet capacity on export vessels, which continued into Q3.

USA Update
North America began the year seeing record high import volumes across its West Coast ports, which coupled with equipment and container shortages led to record levels of congestion, severe delays on vessels awaiting berth and extended dwell times for ocean freight at terminals. However, Q2 saw the start of a decline in West Coast congestion as import freight began to be redistributed to the United States’ East Coast ports.

Ireland – USA Trade Figures
(Source: Central Statistics Office, July 2022)

USA was Ireland’s main non-EU export region in Q2 with 30% of total goods worth just shy of €16 billion for the quarter, a decline from Q1/22, as H1 2022 closed out with an overall Ire-US export growth of €8.09 billion compared to H1 2021.

Meanwhile, imports from the US totalled €5.39 billion and Q2 ended with the USA the 3rd biggest non-EU importer behind the UK and China for quarter as it trumped first quarter numbers. The first half of the year saw US imports increase by €1.88 billion (from H1 2021) to just over €9.95 billion.

USA Supply Chain Overview

April’s Week 2 was the first week in 1.5 years to have under 1 million tenders per day for road freight in the US. Consumer habits that changed during the pandemic led to a load per week growth from 400,000 to over 1 million, however, a combination of factors including reduced demand and capacity availability led to numbers dipping under the 1 million mark for the first time since January 2021.

The Port of New York, the primary export port for goods being shipped to Ireland via Liverpool, saw increased delays through Q2 as the focus shifted from west to east whilst carriers attempted to bypass congestion at the twin ports of Los Angeles and Long Beach.

An additional reason for looking to move goods to the East Coast came down to the uncertainty of labour negotiations at the California ports with the expiration of the labour contract at the time falling in June 2022.

The month of June saw Joe Biden take evasive action to avoid the proposed East Coast strikes with the aim to ensure supply chain stability for the US economy and its import/export partners.

The increased volume of cargo did however put a strain on US inland terminals. A significant rise in containers, especially long-dwell containers, across Los Angeles port’s terminals from May to June 2022 caused concern, leaving the US Railways devoting assets to LA and Long Beach ports in an attempt to clear the backlog, and focusing on Chicago-bound trains to alleviate the pressure.

From a cost perspective, the back end of Q2 saw more promising signs as spot rates for US shipments began to stabilise and demand increased once again. 

Europe Update
Whilst ongoing challenges such as the energy crisis, Ukraine conflict and strike action featured heavily throughout Q2/22, economic growth in the Euro zone was still achieved, albeit slightly below expected numbers. A 0.6% quarter on quarter increase fell 0.1% below the predicted value whilst a 3.9% year on year increase also fell just short by the same percentage (European Statistics Office, August 2022). Although missing out on the predicted growth targets, Q2’s growth stats show that Europe still performed strongly over the period.

Ireland – Eurozone Trade Figures
(Source: Central Statistics Office, August 2022)

Imports from the Eurozone increased by around €2.5 billion from Q1/22 to Q2/22, reaching €9.65 billion in total for the quarter, with a heavy increase in the importation of energy and fuels due to the ongoing crisis.

Exports, however, saw a slight downturn on Q1 numbers dropping from €18.1 billion to €17.87 billion in the second quarter. Although a slower quarter, the year on year figures for the first half of 2022 showed healthy growth in Eurozone exports, going from €28.24 billion in H1/21 to €35.97 billion in H1/22. Ireland’s top Euro export partners for the quarter were Germany, Belgium and the Netherlands. 

European Supply Chain Overview

A mixture of European export bottlenecks, high costs and continued congestion hindered trade in a “very rare” situation for Europe’s ports during Q2/22.

In an attempt to mitigate the congestion caused by Chinese lockdowns, ocean carriers blanked 36% of sailings during the month of May with the majority of those destined for North Europe and the UK. With a third of sailings being blanked, ports across Europe saw a sharp rise in container dwell times and a lack of empty container collections, causing capacity challenges and delays across ocean terminals.

The combination of blank sailings followed by an influx in Chinese exports post-lockdown and lingering Russian cargo caused further congestion amongst key European hubs and transhipment ports with the likes of Antwerp and Rotterdam seeing extremely high yard utilisation and delays of around 5 days in June 2022. Contributing to the European labour shortage, German dockworkers took strike action in response to pay disputes which only compounded the challenges, with little to no relief available for Hamburg-bound vessels due to the already prevalent issues being faced by Euro ports.

Near-sourcing & alternative supply

As widespread disruption to the global supply chain continues, businesses must be quick to adapt to market changes. With the COVID-19 situation in Asia and Ukraine conflict, sourcing has become one of the cornerstones of an efficient and reliable supply chain.

Throughout Q2 Turkey continued to be one of the key near-sourcing partners, posting total export figures of €64.68 billion for the period, up from around €55 billion in Q1/21, keeping it on track to surpass 2021 figures with H1/22 exports nearing a value of €125 billion. Of Turkey’s H1/22 exports, €745 million of those were destined for Ireland with over 52% (€391 million) of those being procured in the second quarter.

Additionally, Turkey’s two-year run of industrial production growth continued in June with 6.7% year on year growth (Source: Reuters).

With unreliable supply from certain areas of the globe, Ireland has seen an increase in trade with neighbouring Northern Ireland to create a promising Island of Ireland trade link. Exports to NI jumped from €1.75 billion to €2.42 billion for the first half of 2022 when compared with H1 2021, whilst imports increased to €2.37 billion.

Customs and sustainability

Carbon Border Adjustment Mechanism
Supply chain sustainability is an important part of the EU’s drive to become a climate-neutral continent by 2050.

As part of these efforts, the EU Carbon Border Adjustment Mechanism (CBAM) was announced as a climate measure that should prevent the risk of carbon leakage and support the EU’s increased ambition on climate mitigation, while ensuring World Trade Organisation compatibility.

The CBAM proposes a levy on imports of specific products. The system is complex, but it also brings the EU a step closer to fully pricing in carbon, as it creates a level playing field for EU producers in specific sectors.

Under this new plan, EU importers  will buy carbon certificates corresponding to the carbon price that would have been paid, had the goods been produced under the EU’s carbon pricing rules.

It will be phased in from 2023 and will initially apply to imports of the following goods:

  • cement
  • iron and steel
  • aluminium
  • fertilisers
  • electricity

In line with and supporting this journey to achieving more carbon-conscious and sustainable business practices, we recently completed our 2021 corporate carbon reporting across all Woodland Group locations, which can be found here.

Woodland’s dedicated green team can support businesses in their sustainability goals.

Northern Ireland Protocol adjustments
On 13th June, the government introduced legislation to fix parts of the Northern Ireland Protocol – making the changes necessary to restore stability and ensure the delicate balance of the Belfast (Good Friday) Agreement is protected.

The Northern Ireland Protocol Bill will allow the UK government to address the practical problems the Protocol has created in Northern Ireland in 4 key areas: burdensome customs processes, inflexible regulation, tax and spend discrepancies and democratic governance issues (Source: gov.uk) 

July supplement

July saw a general stabilisation of the COVID-19 situation in China allowing for improved import and export capacity, however, the emergence of the Omicron BA.5 variant in Shanghai caused the region to re-enforce some restrictions in high risk areas without any major knock-on effects on supply chains.

Congestion struck both the USA’s East Coast and mainland Europe during July, with a mixture of European export bottlenecks and high costs hindering trade. Labour shortages, high yard utilisation and strikes at German ports caused some delays to Irish shipments passing through European transhipment hubs.

Strikes were also confirmed at the UK’s largest port, Felixstowe, scheduled to take place in August.

Key summary

Much like Q1, a combination of factors in the second quarter of the year led businesses to focus on sustainable supply to create a more reliable and robust supply chain for the Irish market.

Price rises, lockdowns and congestion, albeit disruptive, were unable to stop Ireland’s import/export industry growth and despite some profit margins being cut and the introduction of fuel surcharges, the flow of goods in and out of the country has generally seen an increase.

Proposed strikes across US, European and British ports could cause further disruption through Q3 as shipping lines look to get back on track, although congestion spreading across the US’ West and East Coast ports is unlikely to dissipate in the immediate future.

Woodland Group Ireland are working closely with clients, suppliers and industry associations to mitigate any disruption and provide efficient and effective alternatives to current supply chain issues.