This article is written by Austin Garcia
Port congestion is a significant challenge in global shipping and logistics, resulting from an excess of ships waiting to load or unload. This can cause vessels to anchor outside the ocean freight port or drift in designated areas until space becomes available. These delays can last from days to weeks, disrupting shipping schedules and causing containers to miss their connections to trucks, trains, or other ships thus impacting the supply chain.
The causes of port congestion include demand surges, labor issues, extreme weather, equipment shortages, and insufficient storage. Demand surges can overwhelm a port’s capacity, while labor issues can slow operations. Extreme weather events can close ports or damage critical equipment and infrastructure. Equipment shortages can cause containers to pile up, and warehouses near the port may lead to a backlog and global disruption.
Lately, Port congestion has removed over 2% of container vessel supply since March, with Singapore, Dubai, and the Mediterranean as hot spots. Asian box availability remains tight, with Singapore becoming the latest chokepoint. Berthing delays at the world’s second largest container port are now up to seven days, with the total capacity waiting to berth rising to 450,000 teu in recent days. Shanghai, one of the many ports experiencing the massive build-up of box ships at anchor, is a major port for our clients at hand.
Severe congestion has forced some carriers to omit their planned Singapore port calls, exacerbated by downstream ports that will have to handle additional volumes. Delays have also resulted in vessel bunching, with Shanghai and Qingdao experiencing a massive build-up of boxships at anchor. HSBC stated that inefficiencies of cargo movement have led carriers to omit regional calls and blank sailings in their longer haul routes to restore schedule reliability, further reducing the tight capacity.
Delays are contributing to reports of empty container shortages (container crunch) and congestion due to vessel bunching at some ports in China, with congestion also a problem in Singapore and Malaysia. Port Klang in Malaysia ranks eighth on Linerlytica’s list of most congested boxports today. Potential disruptions can be seen in ports in Northern China that are starting to experience congestion caused by container availability due to a combination of Red Sea-related disruptions and buildups of empty containers in ports where they are not needed.
Port congestion is a complex issue with multiple causes and significant impacts on global trade and logistics, necessitating informed and proactive manufacturing practices to mitigate its effects. The longer ships sit idle at ports, the more pressure builds up in the system, driving up shipping rates and fueling inflation. Shipping times have risen significantly since the COVID crisis, with delays exceeding 1.5 days on average by December 2021. This is compared to an ad-valorem tariff of 0.9 to 3.1%
Capacity Requirements Planning or CRP, is the process of discerning a firm’s available production capacity and whether it can meet its production goals. The CRP method first assesses the company’s planned manufacturing schedule, then capacity requirements planning weighs this schedule against the company’s actual production capabilities to see if the current capacity can successfully meet the existing production schedule. UsIng the CRP method as well as friendshoring and nearshoring can help mitigate port congestion and thus repair the supply chain.
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