Singapore port congestion shows global ripple impact of Red Sea attacks

Source: The Business Times
Date: 26th June 2024

Congestion at Singapore’s container port is at its worst since the COVID-19 pandemic, a sign of how prolonged vessel re-routing to avoid Red Sea attacks has disrupted global ocean shipping – with bottlenecks also appearing in other Asian and European ports.

Retailers, manufacturers and other industries that rely on massive box ships are again battling surging rates, port backups and shortages of empty containers, even as many consumer-oriented firms look to build inventories heading into the peak year-end shopping season.

Global port congestion has reached an 18-month high, with 60% of ships waiting at anchor located in Asia, maritime data firm Linerlytica said this month. Ships with a total capacity of over 2.4 million twenty-foot equivalent container units (TEUs) were waiting at anchorages as of mid-June.

But, unlike during the pandemic, it is not a buying flurry by house-bound consumers that is swamping ports.

Rather, ship timetables are being disrupted with missed sailing schedules and fewer port calls, as vessels take longer routes around Africa to avoid the Red Sea, where Yemen’s Houthi group has been attacking shipping since November.

Global port congestion has reached an 18-month high, with 60% of ships waiting at anchor located in Asia, maritime data firm Linerlytica said this month. Ships with a total capacity of over 2.4 million twenty-foot equivalent container units (TEUs) were waiting at anchorages as of mid-June.

But, unlike during the pandemic, it is not a buying flurry by house-bound consumers that is swamping ports.

Rather, ship timetables are being disrupted with missed sailing schedules and fewer port calls, as vessels take longer routes around Africa to avoid the Red Sea, where Yemen’s Houthi group has been attacking shipping since November.

“Liners have been accumulating boxes in Singapore and other hubs.”

Average Singapore cargo offload volume jumped 22% between January and May, significantly impacting port productivity, Drewry said.

SEVERE CONGESTION
Singapore, the world’s second-largest container port, has recently seen severe congestion.

The average wait time to berth a container ship was two to three days, Singapore’s Maritime and Port Authority (MPA) said in end-May. In contrast, container trackers Linerlytica and PortCast said delays could last up to a week. Typically, berthing should take less than a day.

Neighbouring ports are also backing up as some ships skip Singapore.

The strain has shifted to Malaysia’s Port Klang and Tanjung Pelepas, said Linerlytica, while wait times have also climbed at Chinese ports, with Shanghai and Qingdao seeing the longest delays.

Drewry expects congestion at major transhipment ports to remain high but anticipates some easing as carriers add capacity and restore schedules.

Singapore’s MPA said that port operator PSA had re-opened older berths and yards at Keppel Terminal and would open more berths at Tuas Port to tackle extended waits.

Maersk opens a new tab, the world’s second-largest container carrier said it would skip two westbound sailings from China and South Korea in early July due to severe congestion in Asian and Mediterranean ports.

PEAK SEASON
The annual peak shipping season has also arrived earlier than expected, exacerbating port congestion, shippers and research firms said.

This seems to be driven by restocking activities, particularly in the U.S., and by customers shipping goods early in anticipation of stronger demand.

Container rates, meanwhile, have surged, raising the risk of another spate of price increases for buyers like the post-pandemic inflation spike which central banks are still trying to tame.

Rates had stabilised into April but in May, there was a significant increase in ocean freight exports of Chinese e-commerce, electric vehicles, and renewable energy-related goods.

The peak season, which traditionally starts in June, was advanced by a full month, causing ocean freight rates to soar.

Container import volume at the 10 largest U.S. seaports in May rose 12%, fuelled by the second-highest monthly import volumes since January 2023, said data provider Descartes.

“(U.S.) consumers are continuing to spend more than last year, and retailers are stocking up to meet demand,” said a National Retail Federation vice president.

Ocean imports into Europe from Asia are also showing signs of a re-stocking season running into peak season – pushing rates to 2024 highs.

Container freight prices from Asia to the U.S. and Europe have tripled since early 2024.

Rates from Asia and Singapore to the U.S. East Coast are at their highest since September 2022, while rates into the U.S. West Coast are highest since August 2022, freight platform Xeneta said.

Some industry players think part of the reason for the bottlenecks at China ports is fuelled by U.S. importers rushing to buy Chinese goods such as steel and medical products that will be subject to steep tariff hikes from Aug. 1.

But newly imposed U.S. tariffs would affect only about 4% of Chinese imports to the U.S., said the chair of the Council of Economic Advisers.

The executive director of the Port of Los Angeles, the largest U.S. gateway for Chinese ocean imports, also expects a limited impact.

“We may see some of this cargo come in, but it is not going to be a deluge,” Port of Los Angeles said.

Concerns about possible strikes at U.S. ports this year could also be pulling the peak season forward, while German port strikes were adding to the gridlock.

All of those disruptions will likely mean higher prices for consumers, experts warn.

“These are huge financial hits for shippers to absorb,” said the chief analyst at Xeneta.

NEOLink cooperated with our order processing system. He did not replace it or force solutions. Logfret did it better than other companies on the market – it adapted its system to ours. Logfret didn’t come to us saying, “We have this solution, and you either use it or we won’t cooperate.

Procurement Director

Pumps Manufacturer

We made a huge improvement in global visibility with a global platform—anyone can log into NEOLink and look at a shipment anytime, anywhere in the world. We wanted a freight forwarder with a good technology platform, which could handle the complexities of our business and we found NEOLink!

A global leader in performance materials and specialty chemicals

My suppliers have less or zero experience with international logistics. Thus, not able to create proper documentation which leads to tremendous delay. Thanks to Logfret who provide training to all suppliers and work with us to build up a consolidation hub to reduce transportation costs significantly.

One of the world’s leading designers, manufacturers and distributors of ride control products