Ports have always faced delays caused by waves, fog and storms, but the pandemic has brought the biggest disruption since the start of container shipping 65 years ago.
“The Covid-19 pandemic has highlighted that ports are in desperate need of investment,” said John Manners-Bell, chief executive at consultancy Transport Intelligence. “The entire port infrastructure system has been overwhelmed for the past year.”
There are currently 353 container ships stuck outside ports around the world, more than double the number from earlier in the year, according to real-time data from logistics company Kuehne+Nagel.
In some cases, such as the ports of Los Angeles and Long Beach in the US where there are currently 22 ships waiting for a berth, it will be up to 12 days before the ships can drop anchor and unload their containers, ready to be distributed to factories, warehouses, shops and homes across the US.
The logjam has caused stock shortages and delays to deliveries, raising prices and frustrating consumers at a time when a pandemic-led boom in online shopping has increased demand for next-day delivery.
Covid-19 border restrictions, distancing requirements and factory closures have all wreaked havoc on traditional supply chains, leading to soaring freight rates on the main shipping routes between China, the US and Europe.
Even before the pandemic, ports were under pressure to upgrade their infrastructure by automating operations, decarbonising logistics and building facilities that can handle the new generation of ever-larger ships.
“It’s not correct to say there were no problems before the rush of cargo,” said Soren Toft, chief executive of the world’s second-largest container shipping group MSC. “Port complexes were becoming old, there were capacity restrictions [and] there were restrictions on the ability to serve the ever-growing size of ships.”
Shipping groups such as Denmark’s AP Moller-Maersk, the world’s largest container shipping line and vessel operator, Swiss-Italian MSC, Germany’s Hapag-Lloyd and CMA CGM of France have struggled to deliver goods on time, with containers stranded at sea.
The disruptions have been exacerbated by new, even larger ships, which have become gigantic over the decades, as owners target economies of scale to reduce transport costs.
The biggest ships can carry up to 20,000 twenty-foot containers at a time, which if loaded on to lorries would stretch further than the distance between Paris and Amsterdam on a motorway lane. But they also require changes to the infrastructure, including deeper docks and bigger cranes.
New infrastructure takes time to deliver. Even a crane can take 18 months from being ordered to installation, making it hard for ports to respond quickly to changes in demand.
Turloch Mooney, associate director of maritime and trade at IHS Markit, said some ports might have been “sub-par” and failed to adapt to the new, larger ships, particularly in emerging markets such as Bangladesh and the Philippines, where there was chronic congestion even before the pandemic.
The layouts of terminal yards, for instance, might not have been configured as well as possible to handle sudden increases in throughput, he said.
But improved infrastructure was only part of the story, he added. The pandemic had highlighted the need for greater co-ordination, information exchange and digitisation throughout the supply chain, he said.
In some cases, productivity — though hampered by social distancing — could be improved. In North America, the average time container ships spent waiting on an anchor for berths jumped to 33 hours in May, compared with just eight hours in 2019, according to IHS Markit’s Port Performance Data.
Although the larger vessels are intended to save costs for their owners, they also mean ports receive fewer calls, which squeezes their returns.
The pandemic has piled on the pressure further, raising costs and hitting margins, which has forced some ports to cut expenditure by reducing staffing and increasing automation.
“Ports took a hard look at their cost base and tightened their belts during the pandemic,” said Shyamali Rajivan, director of infrastructure and project finance at Fitch ratings. “But it will be interesting to see if it’s sustainable.”
Others argue that it is unfair to blame the ports for problems that have occurred during the crisis, which were exacerbated by the grounding of one of the world’s largest ships in the Suez Canal earlier in the year.
“Every part of the supply chain is at breaking point at the moment,” said Manners-Bell. “You can’t blame the freight forwarders or the trucking companies or the shipping lines. Even small changes in demand can have a huge impact further down the supply chain.”
Some shipping companies have taken matters into their own hands and are investing in ports so their own vessels can get priority treatment.
In the latest example HHLA, a terminal operator in Hamburg, said it was in talks with Cosco Shipping Ports, a subsidiary of a broader Chinese shipping conglomerate, over a minority stake.
Gabrielle Dale of Macquarie Asset Management, a port investor, said this made the shipping groups “partners in planning for and investing in terminal infrastructure in order to provide capacity for demand”.
In the UK, where most ports are wholly owned by the private sector, operators have said the government would need to support the industry in meeting ambitious net zero targets. This includes raised quays and improved flood defences, as well as electrical charging at docks so that cruise ships, which berth with thousands of passengers, can convert from diesel power.
“There is no business case for ports to make this investment and the government will need to provide funding to make it viable,” said Mark Simmonds, director of policy at the British Ports Association trade body.
But perhaps the biggest question is how ports will adapt to possible changes in consumer demand after the pandemic.
“The demand for next-day delivery has changed the way in which shippers select ports and that could change again if, after the pandemic, it goes out of favour,” said Marc Levinson, a container shipping expert.
Source: Financial Times August 10, 2021 | By Fill Plimmer and Harry Dempsey