What’s the crux of the congestion in the ports of China, the United States and Europe

From the second half of last year until this year, there has been a spectacle that has not been encountered in many years in some major ports around the world-just like the traffic jam we have seen in cities, a huge number of ships are trapped on the water, waiting to enter the port to unload. The ships lined up in Los Angeles and Long Beach in the United States even extended more than 20 kilometers along the coastline. What is causing the congestion of large-scale ports around the world? Is there a similar situation in Chinese ports? Which industries does port congestion bring opportunities?

China: Containers can only go in and out, and one box is hard to find

In 2021, the Yantian International Container Terminal (Yantian International), known as the “barometer of Shenzhen’s foreign trade”, is full of densely packed containers. In the past January and February, Yantian International, which has the most intensive international routes in South China, increased its throughput by more than 40% year-on-year, and added 9 new international routes including the United States, Canada, West America, and South America.

Starting before the Spring Festival this year, Yantian International’s operations have risen sharply, and container trucks near the port have even been congested for several tens of kilometers. A report issued by Yantian International to the Shenzhen Container Trailer Transportation Association in early February, obtained by a reporter, showed that the storage of heavy containers at the terminal was nearly 300,000 TEUs, the highest peak in history, and the storage density was close to the limit. In analyzing the reasons, Yantian International stated that the port is dominated by European and American routes. Due to the epidemic, the slow operation of European and American ports has affected the normal operation time of flights, which has caused the port to store heavy containers from the normal 3-5 days to 9.5 days. Around days. An industry insider revealed to a reporter that the congestion in Yantian International has been eased recently, and the prices of many popular international routes have also fallen, but the demand for freight remains strong.

The situation experienced by Yantian International has also recently appeared in many large ports in China. According to industry insiders, from the beginning of the Spring Festival to more than half a month after the festival, it is usually the traditional off-season for shipping. However, this “off-season” at Chinese ports this year is not “light” at all. According to the latest data released by major domestic ports in February, the throughput of Shanghai Port, Xiamen Port and other ports in February reached the highest record in the same period in history, and the container throughput achieved double-digit growth. Shanghai shipping industry analyst Wu Minghua told the reporter that China’s ports have ushered in such a busy “off season” mainly because the global demand for “Made in China” has soared, and the operation of ports in the United States and other places has been affected by the epidemic. As a result, some export orders were shipped earlier than in previous years, and the shortage of containers that began in the second half of last year exacerbated this situation.

A reporter went to Shanghai Yangshan Port for an interview in November last year. The relevant person in charge said that the import and export of Yangshan Port began to recover gradually in April last year. The growth rate has accelerated in the second half of the year, and the monthly container throughput has continuously set new highs. As the epidemic has led people to live more at home, small household appliances and vacuum cleaners produced in China have become new growth points for exports.

China’s export volume has soared, but the economies of European and American countries affected by the epidemic have not yet fully restarted. This has also brought a rare container shortage to the global shipping industry. The above-mentioned person in charge of Yangshan Port told the reporter that due to the impact of the epidemic on the operation efficiency of many major foreign terminals, many empty containers were stranded in the local area and could not be brought back to China. It has continued, and empty containers have become a more scarce resource than positions.

Taking the current busiest Pacific route as an example, many ports on the west coast of the United States are already congested. Wu Minghua told the reporter that due to the epidemic, the decline in business volume at some ports on the west coast of the United States has led to layoffs and increased congestion. Wu Minghua said that it usually takes 24 hours to unload cargo at US ports, but it has recently taken 3 to 5 days or more, disrupting the supply chain and international trade.

And Chinese container manufacturers have been producing at full capacity, and many workers have to work overtime during the Spring Festival. However, Mr. Zhang, the marketing manager of the container manufacturer Singamas, told that it is difficult to further expand production capacity in a short period of time due to the rising cost of raw materials such as steel.

The current surge in global shipping and increased port pressure is also reflected in the large-scale machinery and equipment used in the port. Zhenhua Heavy Industry is one of the world’s largest port machinery manufacturers. Chen Qiang, general manager of the company’s port machinery operations department, told the reporter that the demand for port machinery has a certain lag, reflecting future expectations. From the perspective of Zhenhua Heavy Industry’s order situation, domestic orders for HAECO continued to grow in the second half of last year, while overseas orders surged in the fourth quarter of last year. This also reflects the explosive growth of demand in the shipping industry recently.

Chen Qiang said that after the epidemic, the trend of port automation and intelligence has become more obvious. Take China as an example. For example, the fourth phase of Shanghai Yangshan Port has built the world’s largest single fully automated terminal. Due to difficulties in recruiting labor and the need for normalized epidemic prevention, the development of port automation and intelligence will accelerate, and port workers will also be expected in the future. From the skill-based work in the sun and rain to the supervisory and management work in the control room.

Regarding when the global shipping industry and port operations can return to normal in the future, some insiders believe that as more shipping companies begin to make great efforts to ship empty containers to China, the chaos will gradually ease. Chen Qiang also said that the new crown vaccination plan in Europe and the United States is gradually advancing, and it is believed that after work and life in these countries return to normal, the supply chain can return to normal. Reporters also noticed that the latest Shanghai Export Container Freight Index and China Export Container Price Index released by the Shanghai Aviation Exchange both declined, indicating that the market is undergoing a correction, but shipping demand is still at a high level. ▲

United States: Goods can only be imported but not exported, and the demand is huge

The east coast, west coast, and Gulf Coast ports of the United States carry all the import and export capacity of the United States and other countries in the world. US media recently reported that along the coast of Los Angeles, there are more than 20 container ships full of exercise bikes, electronic products and other popular imported products that stretch for more than 20 kilometers along the coastline and have been parked for several days or even weeks waiting for unloading. According to statistics, at least 7 of the 10 busiest ports in the United States often face congestion. The fundamental crux of the problem lies in port workers’ labor disputes, infrastructure not being able to keep up with demand, and backward management and dispatching systems, and other complex and difficult-to-solve reasons. During the special period of the epidemic, the port fell into a deadlock.

The congestion in the US port “kicked the whole body”, so that the port transshipment hub in Singapore, as far away as Asia, has also experienced a surge in ship arrivals and a surge in the number of containers since September last year. According to Singapore’s “Business Times” report, the current transit time of cargo ships in Singapore Port has been extended from at most two days in the past to the current 5 to 7 days. In addition to Singapore, Malaysia’s Port Klang and Sri Lanka’s Colombo Port have also experienced similar problems. Goods from these ports have also been transferred to Singapore for loading and unloading. Singapore logistics company Lisheng Logistics told Singapore’s Lianhe Zaobao that Singapore’s seaport is an important transit point where containers are unloaded and then loaded and shipped to other regions. However, the epidemic has caused many bottlenecks in global shipping, and containers staying in the country cannot be punctual. Congestion also occurred in transshipment and arrival vessels.

According to Singapore’s “Straits Times”, the sudden increase in demand is one of the main factors causing delays: People are forced to stay at home due to travel restrictions due to the new crown, increased spending on household items and other equipment, and large purchases of medical equipment for use. To control the virus outbreak, container volume also rebounded in the second half of the year. So far, the shipping volume from the Far East to North America has increased the most. Compared with the first half of 2020, the throughput in the second half of 2020 has increased by 3.6 million TEUs, which is an increase of 2.1 million TEUs compared with the second half of 2019.

According to the analysis of Lianhe Zaobao, in addition to the epidemic, another important factor that interferes with the shipping supply chain is that the huge increase in US consumer demand has caused the gap between local imports and exports to widen. According to data from the Port of Los Angeles, in January, inbound imports reached 437,609 TEUs, while exports were only 119,327. Nearly 280,000 empty containers were stranded in the local area, an increase of 14.5% year-on-year, but Asia is facing a shortage of containers.

In order to solve the problem of unbalanced supply and demand of containers, some carriers have begun to transport empty containers back to Asia in large numbers. According to a recent report by Bloomberg News, due to the high profits that empty containers can bring back to China, some carriers refuse to deliver American agricultural products and choose to ship empty containers to China as soon as possible, and then transport Chinese goods. The head of the Los Angeles Port Office, Gene Seroka, said that in Los Angeles, the largest container cargo port in the United States, 3 out of 4 containers returned to Asia are empty, and under normal circumstances, this ratio is 50%. At the beginning of last month, a 200,000-ton-class large container ship of COSCO SHIPPING once transported 15,000 TEUs to Ningbo at a time to alleviate the shortage of containers in China’s ports.

According to the New York Times, some experts believe that as the number of vaccinated people increases and life returns to normal, Americans will once again change their consumption patterns from buying goods to experiencing life, which will reduce the demand for containers. But even if this shift occurs, retailers will start hoarding inventory for the year-end holiday shopping spree. The Biden government’s stimulus plan may bring more jobs, which in turn will trigger another wave of consumption, because people who have been unemployed will have the money to replace old household appliances and buy new clothes. ▲

Ageing ports in Europe take advantage of this opportunity to transform

The Port of Hamburg in Germany is the third largest port in Europe. One-third of the containers loaded and unloaded in the Port of Hamburg are from China or will be shipped to China. The latest data released by the Port of Hamburg Marketing Association (HHM) shows that China will continue to be the largest trading partner of the Port of Hamburg in 2020 with an absolute advantage, with a container volume of 2.4 million TEUs.

Reporters recently saw in the Hamburg port area that the containers here are stacked on top of each other, and there is almost no space left. Dozens of large freighters are anchored in the port. This is something that the reporter did not experience when interviewing the Port of Hamburg in the past few years. The person in charge of the Port Marketing Association told reporters that after the second half of last year, due to the surge in containers, labor shortages and traffic jams, the waiting time for ships at the port was prolonged, which caused delays in returning empty containers. At present, the average stay time of ships with more than 6000 transaction boxes in the port has reached more than 30 to 40 hours.

It is not only the Port of Hamburg that will be affected, but Felixstowe, the largest port in the UK, usually handles 40% of all container traffic in the UK, and now the average stay time of ships in the port is more than 30 hours. This situation forces the shipper to transfer the goods to other ports. The port of Rotterdam in the Netherlands, the largest port in Europe, and the port of Antwerp in Belgium, the second largest port in Europe, have also caused cargo accumulation and ship delays due to congestion.

According to a report by the market research organization IHSMarkit, from the second half of 2020 to 2021, congestion in major global ports has gradually increased. Ships loading and unloading more than 6,000 containers need to spend an average of more than 83 hours at the port, and the time consumed has increased by 20% year-on-year. .

The severe port congestion, which has not been encountered for many years, has given some European ports with aging infrastructure the opportunity to upgrade and transform. In order to increase the utilization rate of the port, German companies invented an automatic high-bay container warehouse, which has been tried out in ports such as Hamburg and Dubai. A container location can stack up to 11 layers instead of the usual 6 layers. Hamburg will also complete the widening and deepening of the Elbe River this year. German “Economic Weekly” reported on the 18th that China Communications Construction Group is expected to win a 50 million euro contract to dredge the Elbe and build port facilities in Hamburg and Stade.

Hapag-Lloyd, Germany’s largest container shipping company headquartered in Hamburg, has 234 modern container ships. The company’s director Marcus told reporters that due to the huge demand for containers in China, they bought and leased about 300,000 TEUs, and at the same time tried every means to get the empty containers back to China as soon as possible, but they still could not alleviate the huge demand.

As for what exactly is in the container? Marcus told reporters that there are mainly DIY tools such as home sports equipment, entertainment electronics, furniture, electric drills, and home appliances such as coffee machines and toasters. Of course, the supply of masks, protective clothing, and new crown self-inspection kits continues to fall short of demand. Many German traders and retailers also told reporters that the “Made in China” in their hands is almost sold out. If no new goods arrive, they will also lose opportunities in this online shopping wave.

Container manufacturing companies have also benefited from the shortage. Approximately 60% of the world’s cargo is transported in containers. 150 million containers are transported by sea every year. At present, these containers are operating at full capacity. German TV said that early last year, global freight prices were still at the lowest level in history. But since March of that year, the cost of shipping containers from China to Europe has been rising, and now it has increased almost tenfold. At the beginning of last year, a container rent cost about 1,000 US dollars, and now the price has reached more than 10,000 US dollars. Yan Sen, the founder of Danish freight company SeaIntelligence Consulting, said that at present, global freight container manufacturers are manufacturing new containers at full speed. At the same time, many traders are collecting second-hand containers. At present, the price of a second-hand container has exceeded 1,500 Euros, which is almost as expensive as a brand new container before.

In addition, shipping companies are also winners in the port congestion. Data from Denmark Maersk, the world’s largest container shipping company, shows that due to increased demand for container ships, the company’s operating profit increased by 85% in the fourth quarter of last year to more than US$2.71 billion. Hapag-Lloyd, Germany’s largest container shipping company, also predicts that the profit in 2021 will “significantly exceed” the previous year, which is expected to be US$3.3 billion, which is more than 1/3 higher than the level in 2019.