Date: Monday, October 4, 2021
Source: Sourcing Journal
As much as 10 percent of global container capacity is stacked up on ships outside of congested ports, according to data from Everstream Analytics. And now, only adding to the seemingly never-ending congestion problems, the number of containers being loaded and unloaded from these vessels keeps escalating.
Container “call sizes” are up between 10 percent and 73 percent over a two-year span across major U.S., Northern European and Asian ports, according to the latest Port Performance Data from research and analysis firm IHS Markit.
The Port of Long Beach lays claim to the 73 percent surge, taking in 7,000 containers per shipment instead of the early 2019 totals of approximately 4,000. The second and third-highest container shipment rates occurred in Singapore and Shanghai’s Yangshan, where call sizes increased by 27 percent and 23 percent respectively.
“The severe operational strain is caused by the surge in cargo volumes coming in much more concentrated loads,” Turloch Mooney, associate director, maritime and trade at IHS Markit, said in a statement. “This spike in demand is placing heavy stress on ocean and landside operations, increasing yard congestion and cargo dwell times, with knock-on effects on equipment repositioning and intermodal links further fueling the problem and resulting in sustained congestion at key global gateways.”
In total, the average vessel now requires more than 3,000 container moves per single call as global trade volume bounces back, IHS Markit said. And on the U.S. West Coast, this situation is even more intense, said Mirko Woitzik, senior manager, intelligence solutions at Everstream, during a webinar discussing the impasse in the oceans.
North American ports lag Asian counterparts in productivity, anchorage
A productivity issue in Los Angeles, Long Beach and Canada’s Port of Vancouver appears to exacerbate the heavy congestion.
Asian ports can load or unload a container more than twice as fast as their North American counterparts, taking an average of 27 seconds compared to 76 seconds on large call sizes, IHS Markit said.
With that in mind, more than 40 percent of ships at the three major North American West Coast ports require to anchor before loading or unloading cargo. This compares to 26 percent of vessels in Southeast Asia, 23 percent in Northern Europe and only 12 percent in Northeast Asia.
As a result, the average anchorage time in North America is 24 hours, compared to just two hours in Northeast Asia.
Everstream data appears to support this, as vessels that are waiting at the Ports of Los Angeles and Long Beach idled for 12-13 days on average in September. And at the Port of Seattle, the rate is even higher now at 16 days per ship, largely due to delays of intermodal shipments to the Midwest.
Currently, the West Coast ports are much more congested than those at China’s Yantian and Ningbo, despite the latter two experiencing Covid-related closures in the summer. On average, both Chinese ports have an average waiting time of only three days, further giving credence to the idea that they have a better handle on quickly loading and unloading cargo.
As scheduling becomes less reliable, every event can be a disruptor
While dozens of ships remain anchored in the West Coast ports, the western Pacific Ocean is currently dealing with yet another issue as Typhoon Mindulle skirts Japan’s coast on Friday, bringing minor disruption to the country’s ports in Nagoya, Kobe and Osaka.
“That event is maybe not extraordinary in itself in normal times, but given the current turmoil in ocean logistics, every event really, minor or big—whether it’s a storm like this one that’s not even making landfall, or a hurricane, such as Ida a few weeks ago, which devastated parts of the U.S. Gulf Coast—is really responsible for the current situation,” Woitzik said. These instances will keep supply chains from normalizing “any time soon,” he added.
As of August, scheduling reliability is at an all-time low, with Sea-Intelligence data indicating that only 33 percent of services arrived on time. Prior to Covid-19, those numbers typically ranged between 70 percent and 80 percent, Woitzik said. What’s even worse though is that the port system in Los Angeles and Long Beach reached as low as 10 percent when it comes to reliability.
Asia-Northern Europe spot rates see biggest rise
While much ado has been made about the rising freight rates, particularly from Asia to the U.S. coasts, the routes from Asia to Northern Europe have actually gotten the worst of deal, Woitzik pointed out.
According to Clarksons Research, spot freight rates on a two-year basis soared 886 percent, while costs for shipments contained within Southeast Asia grew 567 percent. Additionally, these container rates jumped 507 percent for goods routed from Asia to Latin America. Asia-to-U.S. spot rates still saw a big bump, with prices for West Coast shipments escalating 314 percent and East Coast cargo swelling 345 percent.
“The actual spot market rates may actually be far greater because of a lot of the additional costs to obtain space on vessels in an increasingly competitive bidding environment,” Woitzik said.
In addition, spot rates usually capture bookings offered in the week before a ship’s departure. However, some ocean carriers continue offering slots on ships past that point to award space to the highest bidder.
The paradox of capacity
Woitzik noted one apparent paradox in today’s supply chain, in that despite the unprecedented congestion, shipping lines have actually increased nominal shipping capacity in the past 12 months, Everstream data says. For example, on the Asia-Northern Europe trade line, carriers typically had 10 to 11 active ships for the services there, but have since added two or three more ships that are hardly visible since most of the vessels are tied up at ports.
“There’s more capacity now available than 12 months ago or even 18 months ago,” Woitzik said. “But the additional capacity increases have in reality been very net negligible because of the congestion and the delays that we see around the world.”
For now, prices will continue to increase, even in areas where capacity remains stable, according to Everstream’s analysis of the DHL Market Outlook for September. The company is anticipating a strong rate increase for 43 percent of DHL’s 21 shipping lanes out of Asia, and a moderate increase for 38 percent of routes. Only 19 percent either would see no change (14 percent), or a decline (5 percent).
Everstream predicts that the capacity dilemma will likely persist until either Lunar New Year in February 2022, when Chinese factories typically shut down, or potentially even the summer of 2022.
“This could allow some of the equipment imbalances to be restored and a lot of the backlogs to be cleaned out,” Woitzik said. “It happened to some degree actually in 2021, but then the Suez Canal closure really undid most of those efforts. And so, what we’re seeing here is that any external shock, such as the Suez Canal closure, or something like the Yantian Covid-19 outbreak will very likely only delay the normalization period even further.”