State of Freight

Second strike at Liverpool to add to European port congestion, slow product delivery

Key Points
  • Dockworkers in Liverpool are set to start a seven-day strike on October 11 as U.K. and European ports remain congested from dual prior strikes in Liverpool and Felixstowe.
  • The new labor action will add to the existing delays in product delivery.
  • U.K. and Europe are markets for retailers including H&M, Inditex, Associated British Foods, Abercrombie and Fitch, Urban Outfitters, and Burberry.
A striking dockworker on a picket line outside the Port of Liverpool during a strike in Liverpool, UK, on Tuesday, Sept. 20, 2022.
Bloomberg | Bloomberg | Getty Images

Logistics experts are warning another strike set at the Port of Liverpool for Tuesday will only add to the existing delays in product delivery caused by the prior strikes at Felixstowe and Liverpool.

Dockworkers in Liverpool, a significant U.K. port and a port where the U.S. is the No. 1 trading partner, will start a seven-day strike from October 11 to October 17.

The Unite union told CNBC they will continue to hold these strikes until their pay matches inflation. Inflation in the UK is currently at 12.3%. Previous wage offers the union rejected were between 7% to 8.3%.

Trade productivity at Felixstowe, the U.K.'s largest container port, and Liverpool have suffered as a result of various labor strikes since August. As a result, the diversion of trade away from the ports has created a snowball of congestion at other ports in Europe.

Before the last round of strikes, Andreas Braun, Europe, Middle East, and Africa ocean product director of Crane Worldwide Logistics, was warning the delays in products arriving into the U.K. once off a vessel would be 45 days.

Recently the Unite union said they are not ruling out a third strike in Felixstowe.

"The prior strikes in Felixstowe may have ended, but congestion at the port is on the rise," said Alex Charvalias, supply chain in-transit visibility lead at MarineTraffic. According to its data, on Oct. 4 the total TEU (container) capacity waiting off ports limits was roughly three times higher than usual, reaching more than 99K TEUs (containers).

While the situation in Felixstowe worsens, other ports are being disrupted as a result of the prior strikes in Felixstowe and Liverpool.

"The Southampton port has already started facing the disruptions," Charvalias said.

The weekly average TEU capacity waiting off port limits seems to be the highest recorded in recent months reaching 37,593 TEUs the last week of September.

"Looking at the first days of this week (week 40) the situation deepens," he said.

Braun told CNBC that the disruptions of past strikes and the upcoming Liverpool strike will unquestionably aggravate the existing congestion.

"If the Felixstowe dockworkers agree to a third strike it will for sure create additional delays and extra costs for all transport companies involved," Braun said. "However, as the consumer demand is low right now retailers could adjust their operation to the strike and plan deviations around. Unite made it clear that until they have reached their goal in pay rise, they will continue with further strikes, which eventually see congestion and delays rise to an unseen level."

Retail stocks exposed to the strike

The list of publicly traded retailers that make a market in the U.K. is notable, including H&M, Inditex, Associated British FoodsAbercrombie and Fitch, Urban Outfitters, and Burberry. Apparel and footwear portfolio company PVH, which own brands such as Tommy Hilfiger, Calvin Klein, Warner's, Olga, and True & Co, and VF Corp, which owns Vans, The North Face, Timberland, and Dickies, also make a market in the U.K. and Europe. Levi Strauss recently blamed supply chain delays as well as a strong dollar for its recent loss of up to $40 million in sales. Diageo is a huge exporter out of both Felixstowe and Liverpool.

"What we have seen over the last three years is supply chain changes can be expensive," said Dana Telsey, CEO and chief research officer at Telsey Advisory Group. "The delays in logistics can impact the arrival of goods. You don't want your product to arrive late. No retailer wants to discount their products as soon as it is set on the store shelf. Investors need to look at not only the fourth quarter for any impact but also for the first quarter of the calendar year as well."

Telsey tells CNBC the winner of these supply chain delays will be TK Maxx, owned by TJX Companies, the largest U.K. off-price retailer.

How increased port automation can reduce supply chain congestion
How increased port automation can reduce supply chain congestion

The CNBC Supply Chain Heat Map data providers are artificial intelligence and predictive analytics company Everstream Analytics; global freight booking platform Freightos, creator of the Freightos Baltic Dry Index; logistics provider OL USA; supply chain intelligence platform FreightWaves; supply chain platform Blume Global; third-party logistics provider Orient Star Group; marine analytics firm MarineTraffic; maritime visibility data company Project44; maritime transport data company MDS Transmodal UK; ocean and air freight rate benchmarking and market analytics platform Xeneta; leading provider of research and analysis Sea-Intelligence ApS; Crane Worldwide Logistics; and air, DHL Global Forwarding; freight logistics provider Seko Logistics; and Planet,  provider of global, daily satellite imagery and geospatial solutions.