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Under COVID-19: Rising Freight Rate Makes It Hard to Get a Container |When Will the Bad Congestion at Global Ports Free?

As an important node connecting world production and consumption, port hubs occupy a crucial position in the globally integrated transportation system. Since the beginning of this year, "death congestion" similar to traffic jams has appeared in major ports around the world, and the congestion has spread globally and continues to deteriorate. At the same time, the port blockage has also caused soaring freight rates and reduced supply chain efficiency, which has brought great uncertainty to the maritime supply chain and world economy and trade. The upgrade and adjustment of major ports are the current priority.


In March of this year, the Suez Canal, the "throat" of global trade, suffered unprecedented congestion due to a shipping accident. Although the port was completely dredged a week later, this incident reflected a major outbreak of the current status of global port and its congestion, and further spread the delay effect of congestion to the world. Since the beginning of this year, the major ports across the world have experienced congestion, including the ports of Los Angeles and Long Beach in the United States, Rotterdam in the Netherlands, Hamburg in Germany, Felixstowe in the United Kingdom, and Le Havre in France.


According to data released by Seapexplorer, a container transportation platform created by logistics giant Kuehne&Nagel, as of August 9, there were 396 ships stranded in ports around the world, and more than 100 ports reported congestion and other issues. Only 304 ships were affected two months ago, which highlights the current situation of further increasing congestion in container ports around the world.


1. Congestion severely reduces transportation efficiency


According to data from the information company IHS Markit, as of May of this year, the time for container ships to berth has more than doubled compared to 2019, and the situation in North America has deteriorated the most. In May 2021, the average anchoring time of ships was 33 hours, while the average anchoring time in May 2019 was only 8 hours. The large-scale congestion in the port has caused ships to line up and delayed shipping schedules, squeezing and occupying a large amount of capacity on the main trade routes, and seriously dragging down the efficiency of shipping.


Data from the Container Trade Statistics Corporation (CTS) shows that global demand is growing slowly, and only North America has seen a surge in demand. The current dilemma of the logistics supply chain is mainly caused by insufficient capacity, rather than a general surge in demand. Take the operator who operates 10,000 TEUs on the trans-Pacific route as an example. The 6-week round-trip weekly service provided by it requires 6 ships, but if there is a week delay due to the congestion of the ports at both ends of the route, an additional ship needs to be added. To maintain the same service frequency. This means that even if there is 16.7% more capacity in the market, the service level is the same as without increasing capacity.


Therefore, although the major container liner operators have increased a certain amount of capacity on the main routes, the continued congestion and delays still consume the increased capacity. Compared with before the epidemic, the net capacity growth of the market is negative. This means that even though the total number of global container ships is increasing, the actual cargo capacity and transportation efficiency are declining. According to data from shipping data company Sea-Intelligence, 9.6% of global capacity in June this year was occupied by port congestion and shipping delays.


Shipping analysts pointed out that the loss of capacity cannot be resolved in a short time, and as the number of ships increases, the current port congestion situation will only intensify and further increase the delay time. Therefore, the key to the problem is to solve port congestion.


2. Rising freight rate makes it hard to get a container


Port congestion and delays in shipping schedules have fueled a shortage of container transportation, which has contributed to soaring freight rates. Because of these, there has been an incredible situation in which it is "difficult to obtain a container" and "the container is more expensive than the goods". As of August 6, the Shanghai Export Container Freight Index (SCFI) soared to 4225.86 points, more than 4 times the same period last year. Overseas ports continue to be congested and the reliability of shipping schedules is greatly reduced, making it difficult for containers carrying cargo to return quickly. It is difficult for domestic small and medium exporters to get enough containers to transport goods. For goods with low added value, the freight rate has long been higher than the profit or even the value of the goods. At this time, the owner of the cargo bookings is more to prevent the goods from being delivered on time.


All the mechanical products of Haoma Machinery Company are exported to Europe, America, and other countries. In an interview with the Economic Daily reporter, Li Dongsheng, the person in charge of the company, said that despite the high added value of their products and strong demand from foreign users, the soaring freight rates and booking difficulties have had a greater impact on the production and delivery of products. Influence. Due to freight rates and shipping schedules, many customers in North America and Europe have postponed orders or requested to slow down the manufacturing speed of existing orders in order to avoid high shipping costs.


With the continuation and recurrence of the global epidemic, the congestion of global ports will not be improved in the short term, which will continue to be the main bottleneck in the supply chain. The shortage of containers in the shipping market still cannot be effectively resolved.


3. The future trend is determined by the epidemic


At present, under the continuous and repeated impact of the global epidemic, global shipping has been overwhelmed. Various reasons such as the inefficient operation of ports and related supporting facilities, shortage of truck drivers, insufficient railway capacity, limited storage space, slow delivery and return of containers by customers, etc. have made terminal congestion a global problem. With the continuous outbreak of the epidemic in the port, a series of port operations have been cut off. And this has led to a rapid decline in the overall efficiency of the supply chain.


Recently, a COVID-19 broke out in the Port of Tauranga in New Zealand, causing 11 crew members and nearly 100 port workers to be quarantined urgently. The epidemic has caused a large number of dockworkers to stop work, and the container terminal at the Port of Tauranga has almost been paralyzed, making the current overloaded maritime supply chain even worse.


In addition, due to the worsening of the COVID-19 in Vietnam, Ho Chi Minh City, the largest city and the most important manufacturing base, has implemented strict epidemic prevention measures. A large number of garment and textile factories have shut down or reduced production due to the epidemic, and the flow of import and export goods has been slow. The number of personnel in all links of the port has been reduced, and the handling capacity has dropped by more than 50%, resulting in a serious backlog of cargo in Cat Lai Port, and the detention of containers once exceeded 100,000 TEUs. At present, many of the containers in Cat Lai Port were distributed to other smaller terminals.


The global epidemic trend determines the congestion status of the port to some extent. If the global epidemic is not controlled effectively, the production of supply chain companies will remain stagnant, personnel exchanges will continue to be restricted, and ports will operate at full capacity for a long time. These will continue to aggravate port congestion and shipping delays, and the supply chain may break at any time, causing serious blows to companies in trouble.


With the rapid development of economic globalization and international trade, port congestion has long become a common phenomenon in major ports. The main reasons for port congestion include the gradual enlargement of ships, imperfect port infrastructure, shortage of dockworkers, low work efficiency, imperfect storage facilities, inadequate infrastructure for the combined transport of ports and railways, and the combined transport of ports and roads. , And multimodal transport network congestion, etc.


The outbreak of the global COVID-19 has undoubtedly become a major factor in the degree of port congestion, and it quickly spread to all links of the supply chain. The "death congestion" of ports brought about by the epidemic has also made the upgrading and adjustment of major ports a primary issue. How to ensure the normal operation of ports in the era of regular epidemic prevention and control? In addition to traditional methods such as upgrading the infrastructure of ports and wharfs and building supporting facilities, modern methods are also very important. Through digital technology and information to optimize the management of transportation capacity and transportation services, improve the modernization and automation of port operations. This may become a new trend and new way of sustainable development in the future.


When will "death congestion" stop? To truly solve this problem, all countries need to work together to fight COVID-19 and work hard to promote the long-term sustainable development of the port. In addition, it is best for global ports to take advantage of the epidemic as a catalyst to accelerate modernization and digital development, improve their anti-risk and anti-crisis capabilities, and ensure that global shipping is unimpeded.

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