Port Congestion: Look Long Term

Container port congestion has been hitting the headlines recently, but the reasons for it vary widely and in many cases it is only a short term issue. Certain world regions though may be at greater risk of persistent congestion in the longer term.

Figure 1 provides a snapshot of some of the main container ports which have reportedly experienced congestion issues in recent months. Asia features strongly, as does North Africa, along with North Europe and the US. The issue of congestion is not restricted to one part of the world therefore, nor is it solely an emerging or developed market problem.

Figure 1
Selected Container Ports With Recently Reported Vessel and/or Landside Congestion

As Table 1 shows, the reasons for congestion are many and varied, and a number of them are short term in nature. Strikes (or fear of strikes) and adverse weather conditions are factors which will always occur periodically, as will the need to carry out terminal repairs and enhancements.

Whether off-schedule ships are a short term or persistent problem remains to be seen but past experience shows that the industry should not hold its breath. One thing is for sure – bigger ships (and the volume peaks that they generate) are here to stay.

Table 1
Examples of Reasons for Recent Vessel and/or Landside Port Congestion

However, when analyzing port congestion it is important to take a longer term view as this indicates where the problem may be more persistent. Figure 2 shows the locations where three selected ocean carriers have imposed congestion surcharges over the last five years. Tunisia and Venezuela top the list, closely followed by India. Bangladesh and the Philippines are also amongst the more regular offenders.

The US also figures prominently but in this instance it is mainly a case of carriers warning about precautionary surcharges when there is a heightened likelihood of labor unrest, with wording typically along the lines of “a port congestion surcharge will be levied on all shipments originating or destined to the United States in the event of a slowdown or work stoppage at any US port(s)”.

Of course the analysis in Figure 2 is just a snapshot and in particular it draws upon data from only three deep sea carriers. Smaller regional carriers and feeder operators usually experience congestion more frequently, partly because they are serving smaller, more remote ports with more limited facilities which can more easily be over-whelmed, and partly because in the large ports, they are further down the pecking order when it comes to the allocation of berths and resources.

It should also be noted that this analysis of congestion is from the shipping line point of view. Congestion experienced by landside transport providers such as trucking companies is another, highly important issue which is largely under the radar.

Figure 2
Countries With Congestion Surcharges Imposed by Selected Carriers, 2010-14

Drewry’s recently published report Global Container Terminal Operators: Annual Report 2014 provides a comprehensive analysis of the industry and includes five year port demand and capacity forecasts for 20 world regions. The projected regional utilization levels from this report provide pointers as to where there is an increased likelihood of port congestion in the medium term.

Three world regions are projected to see double digit increases in their average regional terminal utilization levels by 2018: Greater China, West Africa and Southern Africa. Of these, Greater China is clearly highly significant given the scale of volumes in the region (198 million teu in 2013 compared with just 8.4 and 5.4 million respectively in the two African regions). The sheer size of the Chinese market means that even modest percentage demand growth rates generate large absolute increases in volumes. As a result, capacity has to be added rapidly and usually in very large projects.

Other regions forecast to see a marked increase in average utilization levels are the West Mediterranean, North Asia, South East Asia and East Coast South America, with increases in the 7-10% bracket.

These regional changes should be seen in the global context where average utilization levels are projected to increase by nearly 8% (reaching 75% by 2018 compared with 67% in 2013).

What must also be remembered is that the average regional utilization levels almost always have significant variations at more granular levels (e.g. at the country, port and terminal levels). Certain locations or certain types of capacity (e.g. big ship capacity) can be under significantly more pressure even if the regional average utilization suggests there is nothing to worry about. The higher the projected regional utilization level, the more likely congestion is to be seen at the granular level.

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Short term port congestion will always be evident in certain places but in the longer term, several world regions will need to be watched carefully as their susceptibility to congestion appears likely to increase markedly over the next 5 years.