The port faces the biggest crisis since the beginning of container shipping
The port has been facing delays caused by waves, fog and storms, but the pandemic has brought the biggest disruption since container shipping began 65 years ago.
“The Covid-19 pandemic highlights the urgent need for investment in ports,” said John Manners-Bell, CEO of the consulting firm Transport Intelligence. “In the past year, the entire port infrastructure system has been overwhelmed.”
According to real-time data from the logistics company Kuehne+Nagel, there are currently 353 container ships trapped outside ports worldwide, more than twice the number earlier this year.
In some cases, such as the ports of Los Angeles and Long Beach in the United States, there are currently 22 ships waiting for berths. It may take up to 12 days for the ships to drop anchor and unload containers, ready to be distributed to factories, warehouses, shops and homes across the United States. .
While the online shopping boom caused by the pandemic has increased demand for next-day delivery, this deadlock has led to stock shortages and delivery delays, driving up prices and frustrating consumers.
Covid-19 border restrictions, distance requirements and factory closures have all caused severe damage to the traditional supply chain, leading to soaring freight rates on major routes between China, the United States and Europe.
Even before the pandemic, ports were under pressure to upgrade their infrastructure through automated operations, decarbonized logistics, and building facilities capable of handling a new generation of increasingly larger ships.
Soren Toft, CEO of MSC, the world’s second-largest container shipping group, said: “It’s incorrect to say that there is no problem before the influx of cargo.” “The port complex has become obsolete and there are capacity constraints. [and] The ability to provide services to ever-growing ships is limited. “
The world’s largest container shipping company and ship operator Denmark’s AP Moller-Maersk, Switzerland-Italy MSC, Germany’s Hapag-Lloyd, and France’s CMA CGM have been struggling to deliver goods on time, and the containers are stranded. maritime.
For decades, as shipowners have targeted economies of scale to reduce transportation costs, new and even larger ships have become larger and larger, thereby exacerbating this disruption.
The largest ships can load up to 20,000 20-foot containers at a time, and if these containers are loaded on a truck, their length will exceed the distance of the highway lanes between Paris and Amsterdam. But they also need to change infrastructure, including deeper docks and larger cranes.
The new infrastructure will take time to deliver. Even the crane takes 18 months from ordering to installation, which makes it difficult for the port to respond quickly to changes in demand.
Turloch Mooney, deputy director of IHS Markit’s Maritime and Trade Department, said that some ports may be “substandard” and fail to adapt to new and larger ships, especially in emerging markets such as Bangladesh and the Philippines that were congested even before the pandemic.
For example, the layout of the terminal yard may not be configured as well as possible to handle the sudden increase in throughput, he said.
But he added that improving infrastructure is only part of the story. He said that the pandemic highlights the need to strengthen coordination, information exchange, and digitization throughout the supply chain.
In some cases, productivity—albeit hindered by social distancing—can be increased. According to port performance data from IHS Markit, in North America, the average waiting time for container ships at anchor berths jumped from 8 hours in 2019 to 33 hours in May.
Although larger ships are designed to save costs for their owners, they also mean that the port receives fewer calls, which squeezes their returns.
The pandemic has further increased the pressure, increased costs and hit profit margins, which forced some ports to cut expenditures by reducing staffing and increasing automation.
Shyamali Rajivan, head of infrastructure and project financing at Fitch Ratings, said: “During the pandemic, the port carefully reviewed the cost base and tightened its belt.” “But it will be interesting to see if it is sustainable.”
Others believe that it is unfair to blame the port for the problems that occurred during the crisis, as one of the world’s largest ships ran aground during the crisis and exacerbated these problems. Suez Canal Earlier this year.
Manners-Bell said: “Every part of the supply chain is at a tipping point.” “You can’t blame freight forwarders, freight companies or shipping companies. Even small changes in demand can have a huge impact downstream in the supply chain.”
Some shipping companies have already done it themselves and invested in ports to give priority to their ships.
In the latest example, Hamburg terminal operator HHLA stated that it is negotiating a minority stake with COSCO Shipping Ports, a subsidiary of a broader Chinese shipping group.
Gabriel Dell of Macquarie Asset Management, a port investor, said this makes the shipping group “become a partner in planning and investing in terminal infrastructure to provide the ability to meet demand”.
In the UK, most ports are wholly owned by the private sector, and operators have stated that the government needs to support the industry in achieving its ambitious net zero goal. This includes raising the pier and improving flood protection facilities, as well as charging at the pier so that cruise ships with thousands of passengers can be converted from diesel power.
Mark Simmonds, policy director of the British Ports Association’s trade agency, said: “There is no commercial case for the port to make this investment, and the government will need to provide funding to make it feasible.”
But perhaps the biggest question is how the port will adapt to possible changes in consumer demand after the pandemic.
Container shipping expert Mark Levinson said: “The demand for next-day delivery has changed the way shippers choose ports. If it is no longer popular after the pandemic, this situation may change again.”