Covid-19 Port Congestion: How to Unclog the Economy
July 12, 2022
Apart from the Suez Canal blockage in March, 2021, many big commercial vessels shipping cargo were stranded outside ports last year, from South Carolina to Europe and Singapore. Why all this happened?
When lockdowns and travel restrictions were imposed in 2020, many started ordering gym equipment and office furniture, setting up work from home and turning their basements into gyms. There has been a surge in orders globally. Not surprisingly, this translated into a 48 percent increase in retail purchases while online sales increased by 24 percent. Yet, the bulk of this trade (90 percent) is shipped in metal boxes by enormous commercial vessels.
Also, due to Covid-19 restrictions, there have been shortages of supply chain staff, including dockworkers, further contributing to the congestion across the logistics and supply chain, including warehouses, depots, road transport, and inland waterways.
What all this means is that for every container waiting to be unloaded, there has been an empty one waiting idle at another port.
Anchorage times across all vessel categories increased dramatically, with up to 40 vessels stuck in congestion at a time. Bigger ships, however, have been affected the most, with an average of 3.5 days or over 83 hours in waiting. There has been an increase of up to 9.5 percent for smaller vessels, based on call size.
Congestion resulted in a demand and supply imbalance, causing a drastic increase in freight rates and end-user prices. Containers shipped from Asia to Europe and the U.S. saw a 400 percent increase in prices while carrier’s reliability decreased dramatically, resulting in further delays globally.
Why Price Hikes?
Data shows that delays cost carriers between 0.6 percent and 2 percent a day in cargo value. Each day translates into losses of about $20 million, and a delay of 3.5 days costs carriers about $70 million. And it is not just ports that have been affected. A ship stranded at the wrong place causes further congestion and problems with inland logistics, including Ro-Ro services, trains, and trucks. This results in losses across all nodes of the supply chain, including trucking and warehousing logistics.
More time at anchorage and traffic congestion results in increased fuel consumption and more carbon emissions. Experts note that early ship arrivals, inadequate planning, and port congestion has resulted in additional fuel consumption worth $18 billion a year, accounting for 160 million tons of carbon emissions.
While the Covid-19 pandemic is to blame for all this, the fact is that the systems used on most ships and ports of call are not always compatible, resulting in a lag effect and gaps in communication. If ports and ships’ systems were compatible, the result would be just-in-time arrivals. Once it is clear that the port authorities cannot receive a ship, staff can slow down speed so that the vessel arrives as per the adjusted estimated time of arrival.