New analysis from internationally respected maritime analysts, Sea Intelligence, has conclusively demonstrated that the big, un-tackled problems in the ongoing freight crisis can be found at ports and on the landside.
Bottleneck problems in ports
“Building more vessels will not materially solve the problem – partly because vessels ordered today mainly get delivered in late 2023 and in 2024, because injecting more vessels compound the bottleneck problems in ports, effectively increasing the delay time. The resolution has to come from solving the congestion problems on the landside. This does not only imply solving the congestion in the ports, but also the hinterland infrastructure related to trucks, chassis, rail, etc,” said Sea Intelligence CEO Alan Murphy.
So the benefits of the huge investments by ocean shipping companies will, unfortunately, be swallowed by port congestion and landside inefficiencies will simply swallow the benefits of these investments.
Shipping Australia observes that the logical corollary of Mr Murphy’s statement is that, even as the new ships hit the water, by 2023 and 2024 we will still be stuck with poor port and landside supply chain performance until actors in those sectors lift their game.
Noting that the impact of vessel delays is “by far” the largest single element in the ongoing severe capacity shortage, Sea Intelligence examined the actual impact of delays on container ship capacity.
A few days of port congestion removes huge volumes of capacity
The analysts looked at a six week round trip service with six vessels of 10,000 TEU each, that are five days late on the headhaul and two days late on the backhaul.
“So the round-trip increases to 7 weeks, requiring an additional 10,000 TEU vessel to compensate for the delay-induced loss of capacity,” the analysts note, adding that an affected carrier would need to increase nominal capacity by 16.7% to compensate.
“The effect of which is the same as if market demand had increased by 16.7%,” the analysts explain.
Sea Intelligence looked at the Transpacific routes and noted that, since the start of 2021, ocean shipping companies have had to deploy “more than 20% more nominal capacity than usual, simply to offer the same weekly capacity”.
So despite the actual injection of “significantly more vessels” into the Transpacific routes, the cargo carrying capacity on a roundtrip basis as measured in TEU x days had actually declined.
The same pattern was seen in the Asia-Europe trades too.