The global supply chain has been in a state of flux for many months now and any estimate for a de-escalation and return to normal rhythms has been thrown into the “waste basket”. The fragility of the situation has been amply demonstrated by the recent incident in China, in particular at the port of Ningbo, where a single case of coronavirus caused huge congestion and queues of ships outside berths.
The Meishan terminal at that port suspended all operations from 11 August and the problems persisted for two weeks.
To understand the extent of the damage to international trade, the following should be noted: The Meishan terminal accounts for about 20% of the total containers handled annually at the Chinese port. Some 30 million TEUs were handled through Ningbo last year, a performance that ranks it among the top three ports in the world. The port’s other terminals are operating normally, but in congested conditions due to intractable maritime transport problems. Meanwhile, the problems are spreading to nearby ports, with Shanghai and Hong Kong already recording delays. Notably, Shanghai was the world’s largest port in 2020 in terms of container throughput.
The closure in China coincides with a difficult period, and the critical Christmas shopping period is approaching. International trade volumes increase in a major way in the second half of the year, as businesses in Europe and North America prepare for a “surge” in sales over the Christmas holiday. However, the current situation poses major risks and getting goods shipped in time for Christmas is certainly a challenge.
The world fleet is at a standstill
Given the congestion in China, leading liner shipping lines are rescheduling their routes, avoiding calling Ningbo. Germany’s Hapag-Lloyd announced in the week that four ships will serve different ports. Other companies such as Danish Maersk and French CMA CGM are moving in the same direction.
So the new problems are adding to the delays in the ports. In a note to Capital.gr, one of the leading logistics companies, the Swiss Kuehne+Nagel, pointed out that currently (data up to August 17) 343 containerships are stuck outside ports worldwide. According to the same source, 78 ports are facing challenges such as long “queues”, double the number compared to the beginning of the year. In fact, cases of ships waiting up to 10 days to be serviced in China are recorded.
In the map sent to Capital.gr by Kuehne+Nagel, through its digital tool Seaexplorer, it can be seen that, apart from Asia, the situation is serious in the US, but also in Northern Europe. These are, after all, the three regions that have been “hit” hardest by the logistics crisis this year.
The delays on routes from Asia to Northern Europe are indicative of this. A newly built Mediterranean Shipping Co. (MSC) ship was scheduled to arrive in Antwerp, Belgium, on 28 July and, after avoiding that port due to congestion, finally arrived in Rotterdam, the Netherlands, on 14 August.
Business viability threatened
Congestion at key ports is further increasing the transport costs of containers, which have soared since the beginning of the year. The profits of shipowners and liner shipping companies are increasing and the ‘burden’ has been shifted to importers and exporters of containers.
According to data platform Freightos, transporting a 40-foot (ft) container from China to the US West Coast now costs around $15,800, ten times the pre-pandemic levels and double the July figure. Similarly, Drewry’s platform records that the cost of transporting a container on the spot market from Shanghai to Genoa has reached $12,993, an increase of 556% year-on-year.
“Some companies, especially small and medium-sized ones, are exposed to historically high spot market prices, which, if maintained at these levels, will threaten their viability,” leading containership market analyst and CEO of Danish consultancy Vespucci Maritime, Lars Jensen, tells Capital.gr.
“Some other companies, basically larger in size, can still move their cargoes by taking advantage of contract prices, which, although they have increased significantly compared to last year, remain well below spot prices,” he notes.
This, he says, means that “companies competing in the same sectors are realising that marine logistics is a much more important competitive parameter than it was before, which of course puts a burden on the smaller players.”
Indeed, several liner shipping lines are imposing extra charges due to congestion-related delays, which are in addition to those that will be applied due to the ‘high season’. Already one of the largest shipping lines, MSC, is preparing charges of $1,000 per feu for shipments from East Asia to the US and Canada, with an implementation date of the end of the month.
Normalcy is difficult
“The market fundamentals today are to a certain extent simple: Demand is far greater than capacity. The lack of capacity is due to major problems in the market. There is no way to increase global capacity beyond addressing these problems. Until then, the reality is that some cargo will not be able to move as and when companies want it to. This raises prices. It’s simply a supply versus demand ratio,” Jensen explains.
Asked when he expects the situation to de-escalate, the analyst appears hesitant. “We can no longer predict it,” he points out. As he says, maritime transport had experienced a similar period in 2015, when there were significant congestion problems on the US West Coast due to labour disputes. The number of ships on hold is similar today. Back then it took six months for companies to get back to normal operations.
However, the big difference from today is that logistics has faced not one, but many different obstacles since the beginning of the year. First, the pandemic changed consumer habits and “sparked” online shopping, boosting demand for importing goods that were overwhelmingly transported via containers. This was followed by the Suez incident involving the “Ever Given”, the “short circuit” in China at the beginning of the summer and the current new “wave”. These successive problems have pushed ports to their limits.
For his part, Hapag-Lloyd chief executive Rolf Habben Jansen believes that normality will not be reached before the first quarter of 2022, despite the efforts being made globally to increase global container capacity.
Positive sign in Piraeus
The port of Piraeus has so far successfully absorbed the pressures, maintaining a satisfactory level of container throughput and ship handling times. However, increased congestion is a constant threat, creating chaos in ship arrivals as most arrive late outside the agreed times or arrive several at once, putting maximum pressure on the ports. Thus, and given that several liner companies’ schedules are: China – Piraeus – Northern Europe – Piraeus – China, it remains to be seen whether there will be delays at the largest Greek port as well.
However, according to the shipping portal MarineTraffic, between 9-15 August the waiting time for ships at the Piraeus anchorage was 0.9 days, down from the 1 day delay recorded a week earlier. In any case, the times appear increased compared to mid-June, when ships waited about 0.4 days, but are not yet a cause for concern. The relatively good situation in Greek ports is also reflected in Kuehne+Nagel’s map, with the number of ships waiting to be serviced being in single digits.
In terms of container handling, after a poor start in 2021, the port has picked up the pace and managed to remain competitive. July proved to be the best month so far, as 444.7 thousand containers were handled from the two piers managed by COSCO (II and III). In total, the port handled around 2.8 million containers in the seven months, not counting those at Pier I, which is controlled by PPA and for which no official figures are yet available. This is a decrease of 0.8% compared to the seven months of 2020.
However, rates appear “down” in August, due to the lower volumes traditionally handled in the midst of summer holidays, but also to the re-emergence – as mentioned above – of congestion phenomena in other ports and “blank sailings”, i.e. cancellations of calls at ports or even entire itineraries by the leading liner shipping lines.
Ports need investment
The pandemic, however, has highlighted the great need for port infrastructure worldwide for investment in upgrades. It is a situation which analysts say has brought 2024 to 2021, with cargo and demand growth that would normally be phased in over the next three years. Even before the pandemic, however, port operators had to make development moves to achieve automated processes, “green” transport and build infrastructure that can accommodate the huge, next-generation ships.
The PPA took such an action, taking delivery a few days ago of four modern gantry cranes from China, which are capable of handling ships up to 22 container rows wide. With the new investments, the Piraeus Container Terminal will have 30 gantry cranes, 22 of which will be the world’s largest gantry cranes of the latest generation (22-26 Rows), and 71 of the most modern dense stowage RMGs and RTGs. Piraeus is becoming, according to the port people, the most efficient and modern hub in the Mediterranean, with the ability to handle the giant ships of the shipping industry.
At the same time, COSCO has been pushing for the construction of the fourth pier, an investment that is estimated to increase the port’s capacity to over 11 million TEUs, close to the performance of leading European ports. The project, however, is facing opposition from the local business community and the government does not seem willing to take it out of the drawers at the moment.
In Thessaloniki, a contractor is expected to be selected for the €180 million sixth pier project. It is recalled that binding financial and technical offers were submitted at the beginning of the year. With the implementation of the project, the port will be able to handle oversized containerships with a capacity of 24,000 TEUs, thus enabling it to make the most of its comparative advantage as a sea gateway to South-East Europe.
At the same time, the port is not standing still and is investing in new equipment. Earlier this year it signed a contract for the supply of two new gantry cranes, worth €15.8 million, with their arrival scheduled for next December. At the same time, it has invested in 12 Straddle Carriers capable of stowing containers at 3 levels per height, worth €9.7 million, which are fully operational.
Source : capital.gr