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June 10, 2024

Breaking Down the Port Congestion Crisis 

Port Congestion Crisis

Nearly half of all Asia-Europe westbound sailings have failed to depart on time due to escalating port congestion in Asian ports. The latest data from Linerlytica reveals that only six out of 11 Asia-North Europe sailings departed on schedule last week, significantly disrupting the market. This issue has far-reaching consequences for businesses and consumers alike, affecting supply chain efficiency, costs, and reliability. 

Rising Port Congestion in Asia 

Port congestion in Asia has reached unprecedented levels, with major ports like Singapore and Tanjung Pelepas facing severe disruptions. The congestion at port in Singapore has eased slightly, but the strain has shifted to Port Klang and Tanjung Pelepas in Malaysia.  

Source: Beacon 

Waiting times have also increased across all major Chinese port regions, with Shanghai and Qingdao experiencing the longest delays. Ships in Shanghai are waiting as long as five days to berth, marking the highest logjams since the Covid-19 pandemic. S&P vessel-tracking data shows 50 containerships in Shanghai, including at anchorage, exacerbating the delays. 

The Mediterranean Struggles with Congestion 

Maersk, one of the world’s largest container shipping companies, faces significant terminal congestion in the Mediterranean and Asia.  

This congestion has forced Maersk to skip two westbound sailings from China and South Korea, planned for early July. The congestion is compounded by the diversion of ships from the Red Sea due to security concerns, resulting in longer routes around Africa and further straining the ports. 

Ports in China have also been hit by adverse weather conditions, adding to the delays. In response, ultra-large ships from the Far East are offloading containers at western Mediterranean ports like Barcelona, then reloading onto smaller ships for final destinations, causing further strain on operations. 

Increased Shipping Rates and Costs 

The surge in shipping rates and freight shipping charges is another consequence of the ongoing congestion. The Shanghai Containerized Freight Index recently jumped 12.6%, with the cost of shipping a 20-foot container from Shanghai to Europe exceeding $7,000. This increase is driven by exporters rushing to front-load shipments amid concerns over US tariff increases and disruptions in the Red Sea. 

The cost of shipping has also been affected by the diversion of vessels around Africa, significantly increasing journey times and costs. As a result, shipping costs have soared, impacting businesses and consumers globally. 

The Festive Season Rush and Its Implications 

The rush to order shipments for the festive period threatens to deepen the supply chain crisis. Vincent Clerc, CEO of AP Møller-Maersk, warns that the sudden increase in shipping costs and worsening congestion at ports in Asia and the Middle East could lead to a “bullwhip effect,” where retailers order more goods than necessary, exacerbating delays and congestion. 

The ongoing attacks in the Red Sea have significantly disrupted shipping routes, leading nearly all container shipping groups to avoid the Red Sea and opt for the longer route around Africa. This has caused cargo ship delays and further strained the already tense supply chains. 

Strategies to Mitigate Port Congestion 

To address the challenges posed by congestion at ports, various measures are being implemented. For instance, Singapore’s Maritime and Port Authority has reopened inactive container terminals to handle the increasing backlog. By adjusting vessel arrival schedules and increasing the number of berths, the port aims to reduce waiting times and improve efficiency. 

Collaboration between port authorities, shipping companies, and logistics providers is crucial in managing berth congestion and ensuring smooth operations. Proactive communication and real-time updates on berth availability can help mitigate vessel delays and improve the overall flow of goods. 

Shippers should expect ongoing disruptions, particularly in Asia and the Mediterranean. With port congestion unlikely to abate soon, shipping schedules will remain unpredictable, and costs will stay elevated. The festive season rush will further strain supply chains, leading to potential bottlenecks and delays. 

What Shippers Should Expect 

  • Prolonged Delays: Expect longer waiting times at major ports, especially in Asia, with potential delays spreading to other regions. 
  • Higher Costs: Freight rates will likely remain high due to increased demand and operational challenges, impacting overall shipping costs. 
  • Route Diversions: Continued geopolitical tensions and security concerns may force ships to take longer routes, exacerbating delays and increasing costs. 
  • Operational Adjustments: Ports and shipping companies will implement various strategies to manage congestion, such as adjusting vessel arrival schedules and reopening defunct terminals. 

Conclusion 

The current port congestion crisis underscores the importance of resilient and adaptable supply chain management. By understanding the key factors contributing to delays and increased costs, businesses can better navigate the challenges and implement strategies to minimise disruptions. As global supply chains continue to face unprecedented pressures, collaboration and innovation will be essential in ensuring the efficient movement of goods across the world. 

By addressing these challenges head-on, the shipping industry can work towards a more stable and predictable future, despite the ongoing complexities of global trade. 

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