Disruption at Shanghai has spread to Qingdao and Ningbo and is now threatening to spread to ports across Asia, further disrupting supply chains and feeder operations in the coming weeks.
We have been commenting, reporting and issuing supply chain alerts on the delays at Shanghai port for several weeks, so it is irksome, though unsurprising, to find that the congestion is likely to spread further in the short term. It is much more concerning to consider the possibility that operational challenges may be systemic.
Shanghai International Port Group (SIPG) has already rescheduled a number of calls in April and May from the busy Guandong and Shengdong container terminals to Hudong, Pudong and Waigaoqiao terminals in an attempt to alleviate congestion. Despite these actions our Shanghai office have confirmed that vessels continue to wait up to four days to load.
Expectations are now growing that the disruptions at Shanghai, Qingdao and Ningbo will spread to ports across Asia and further disrupt feeder operations in the coming weeks.
The ongoing port disruptions have largely been attributed to increased global demand and the New Shipping Alliances and their vessel phasing-out, phasing-in, compounded by extensive fog restrictions to port operations.
Some leading industry experts are now suggesting that the primary contributing factors may actually be the increased use of larger ships – the 20,568 teu Madrid Maersk is on its maiden voyage – and increased global demand, which has seen volumes rise 6% in Q1 at China’s top 10 container ports.
The experts contention is that even without the bad weather or alliance network restructuring, ever-bigger ships and shippers’ moving cargo ahead of planned rate increases means that the ports would struggle to maintain performance simply under the weight of their extra business.
Drewry supported their assertions by examining what the alliance restructuring meant to day-to-day operations at Shanghai.
It said: “On the surface, Shanghai’s workload looks to have been lightened as there are fewer deep-sea services calling at the port in April than in March, or indeed even April 2016. But the important fact is that even with fewer services, the average size of ships the port has to turnaround has grown by 6% in the course of the year to 8,600 teu.”
In general, the deployment of bigger ships results in lower frequency services and greater volume peaks – when traffic arrives in fewer, larger tranches – that stretch the manpower and yard capacities of ports and terminals.
As fewer terminals are able to accommodate the bigger ships, the operational difficulties faced by ports and terminals gets progressively more localised, as more traffic heads to facilities that can do the job.
Information provided by Shanghai International Port Group (SIPG) for the upcoming 2017 version of Drewry’s Global Container Terminal Operators Annual Review and Forecast indicates that average terminal utilisation levels at Shanghai were very high in 2016, “so it takes very little to push over the dominoes into full blown congestion; there is simply no wriggle room,” Drewry’s concluded.
“Statements from SIPG and carriers such as Maersk Line have all attributed some of the current situation to the alliance transitioning, but getting specific details has been harder to acquire. What we don’t know is how well orchestrated the alliance transition was and if ships arrived as planned, or whether schedules were adhered to but the sheer number of terminal switches overnight was too much for the system to handle,” Drewry noted.
“Add in some heavy fog at just the wrong time and some degree of congestion in already-under-strain ports was inevitable. These are transitional problems and will pass, but the fact that congestion has spread to other ports along the Chinese coast suggests that something else is at play.”
China’s attempt to move towards a more consumer-driven import economy is beginning to impact with import growth outpacing exports by 1.8% in 2016. This fast-growing intake of imports could well be putting pressure on yards in China, that have never had to previously worry about the dwell time of inbound containers.
The danger for shippers is a longer-term trend that, unless remedied by more capacity (to both terminals and yards), will continue to put pressure on ports that are already close, if not exceeding, their maximum utilisation levels.