Singapore navigating shipping squeeze, container congestion amid surge in cargo demand
SINGAPORE: Singapore’s shipping industry is feeling the effects of a global supply chain bottleneck, with an increase in the number of commercial vessels docking and a rise in container volume at the country’s port in recent months.
A sudden surge in demand has outstripped the available capacity of ships, container boxes and ports, resulting in shipping delays worldwide, including in Singapore.
A report by commodities pricing agency S&P Global Platts earlier this month found that an average of 49 vessels per day stayed at Singapore’s port for more than two days in November last year, up from 17 in November 2019.
According to S&P Global Platts, this number stood at 46 in January, before hitting a high of 52 per day in February – an increase of about 60 per cent from the same period last year.
Port operator PSA Singapore said that like many other ports, it has been experiencing a surge in vessel calls and container volumes.
“This exceptional situation is due to a confluence of factors, including an unprecedented and volatile surge in cargo demand, congestion across all nodes in the global supply chain (including depots, warehouses and seaports) due to renewed lockdowns, a lack of usable empty containers while laden ones are held up longer at these nodes, and shipping lines’ vessel sailing schedule reliability dropping to 10-year historical lows, causing further delays at almost every seaport worldwide,” said a PSA corporate spokesperson. Experts have also warned that Wednesday’s (Mar 24) blocking of the Suez Canal – one of the world’s most important trade routes – by a massive 400m-long cargo ship could also cause further bottlenecks in global shipping. On Thursday, Singapore’s Transport Minister Ong Ye Kung said that a prolonged disruption to the Suez Canal could result in PSA seeing further schedule disruptions as shipping lines reroute their journeys.
Mr Rupesh Jain, managing director for Maersk Thailand, Malaysia and Singapore said the shipping giant had experienced the “perfect storm” in global container trade over the past seven to eight months.
After seeing a double-digit volume decline in the second quarter of last year amid global lockdowns due to the COVID-19 pandemic, demand recovered in the third and fourth quarters of last year and “exceeded anticipated volumes much faster than expected”, he said. “The upswing in demand was driven by a US-based demand surge with other markets following suit soon after due to a change in purchasing patterns and government stimulus packages,” said Mr Jain. “All available vessels are in use and it is difficult to secure any temporary additional capacity,” he added.
Container production was also down 40 per cent for the first half of 2020 compared to the same period in 2019 which – coupled with unexpected demand recovery – led to a significant drop in the availability of containers globally, he noted.
Congestion, along with lower productivity at terminals and inland depots, with boxes being tied up for longer periods, have also led to bottlenecks, he added. “As a major transhipment port for the Asia-Pacific region and key Asia-Europe trades, Singapore is not spared,” said Singapore University of Social Sciences’ (SUSS) maritime expert Yap Wei Yim.
“Mismatch between mainline and feeder vessels contributed to significantly longer lay over times for containers sometimes stretching even to weeks,” he said. Capacity shortages are exacerbated by port congestion, disruptions to vessel schedules and disruptions to repositioning of empty containers, he said, adding that freight rates are being driven up as these problems persist. Linerlytica analyst Tan Hua Joo noted that a shortage of port labour has also exacerbated Singapore’s situation.
Container demand is likely to remain high with the roll-out of vaccination programmes and the gradual recovery of the global economy, Dr Yap added. “Hence, unless supply issues in the form of capacity shortages are sufficiently addressed, we may see this development extending into the second half of 2021 and even into 2022,” he warned.
EASING THE SITUATION While some companies have taken to air cargo to relieve the squeeze on maritime capacity, this will only alleviate the current crisis by a “very small extent”, said Nanyang Technological University’s Associate Professor Jasmine Lam.
This is because the shipping capacity by maritime transport is much greater, said the director of the Maritime Energy and Sustainable Development Centre of Excellence. “Extra cargo handling capacity as a backup is needed,” she said, suggesting that more cargo handling facilities and container depots may be necessary to handle such situations. Port operator PSA Singapore said it has been “ramping up additional capacity and resources, and is working closely with shipping line customers and cargo owners to alleviate the situation”.
“The port of Singapore has taken several steps to alleviate the congestion including taking on new labour from non-traditional countries like Thailand and India, and it has re-activated some of its inactive capacity in the Keppel and Brani terminals,” noted Linerlytica’s Mr Tan. “It will also be able to use the new Tuas capacity from the end of this year,” he added, referring to the opening of the first phase of the Tuas megaport facility.
Maersk meanwhile has taken on a number of initiatives to ease bottlenecks across the supply chain, said Mr Jain. “From the conversations we had with our customers, the most common and immediate need was to introduce greater flexibility, enhanced data visibility and new modes of transport into their supply chains,” he said.
“Besides ocean services we provide solutions cutting across the full spectrum of logistics chain to our customers. Our teams in Thailand, Malaysia and Singapore are now providing cross-border trucking option from China to Thailand, milk runs from Vietnam to Malaysia with as much ease as we can do air freight from Singapore to Japan,” he said. Mr Jain added that he expects the current situation to improve as vaccines roll out and buying patterns revert to normal, adding that additional vessels and containers entering the market this year are likely to relieve bottlenecks.
“Exactly when (the situation will improve) is hard to say and could be well into the second quarter, with a lot depending on the global vaccine roll-out,” he said.
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