Port Call Optimization in an Era of Supply Chain Upheaval

In 2019, when Intelligent Cargo Systems launched the first Guide to Port Call Optimisation, the pre-COVID shipping industry was dealing with the typical challenges of an experienced global industry.

Trade tariff tensions between China and the United States in 2019 raised Transpacific freight rates while the upcoming 2020 IMO sulfur regulations meant that shipyard utilization was at record levels, as ship operators strived to install scrubbers and hedge against increased bunker prices. Long-standing geopolitical tensions ignited in the Straits of Hormuz, as multiple tankers and merchant ships were seized or damaged, raising insurance premiums and the nerves of crew and ship operators in the area.

Tariffs and political tensions would pale in significance with the outbreak of COVID-19. A localized outbreak in December 2019 became an epidemic and then a global pandemic. The shipping industry has been at the forefront of the crisis, dealing with primary and secondary effects of COVID ever since January 2020.

With nations reeling from economic turmoil, the shipping companies have acted fast to remain viable. From idle vessels and premature vessel demolitions to the crewing crisis to local and national lockdowns, followed rapidly by the economic recovery, with supply chain demand rocketing causing proportionate rises in freight and charter rates and port congestion; the last two years in shipping have been wild.

The wild ride continues, with shipping companies eager to recoup their COVID losses, build up their reserves and manage the record levels of demand. As nations and economies recover, shipping companies are making record profis, but the industry also has some way to go to be considered back to normal.

Our 2021 Guide to Port Call Optimisation looks at the aforementioned topics in greater detail, together with a range of case studies from companies creating opportunities for shore-based cargo operations monitoring, just-in-time shipping, collaborative data sharing, advanced artificial intelligence usage, cargo forecasting, and turning weather forecasts into actionable insights. We believe that above all else, the sustainability of our industry is key, and to ensure that, we must actively seek out ways to support and collaborate with each other, which is the sole purpose of our Guide.

Container and vessel shortages

To further understand how port call optimization has become increasingly relevant this year, we need to look back at the events of 2019. With China shutting down factory production and enforcing national lockdowns to prevent the early spread of COVID-19, vessels were arriving in Europe and the United States with import cargo and rushing to fill export cargo slots. Full containers were prioritized over empties, with ship operators mindful of boosting short-term revenue in preparation for an unpredictable short-term future.

This demand led to difficulties once China started opening up. A lack of empty containers in the Far East and a glut of loaded containers long-awaited for export put pressure on both ports and operators alike.

Shipping companies were quick to react. At ever-increasing rates, carriers chartered additional tonnage and even recalled vessels that were destined for the scrap yard only a few months earlier. As they did so, it was inevitable that the time needed for vessels to ease pressure on routes would mean cargo owners faced increasing spot rates and more rollovers and cancellations.

Slot cancellations added to the increasing demurrage and detention charges, and cargo owners started looking for alternative means of securing their own supply chain. Feeders, general cargo ships and almost any vessel capable of carrying containers were now tasked on intercontinental voyages to shift the reliance from the major carriers.

Port and canal congestion

As Covid-19 required universal national economic and policy triage, port congestion has been a consistent theme since January 2020.

Even as COVID-related lockdowns took hold, the cargo need remained high enough for shipping to continue. Items relating to personal protective equipment (PPE) and chemicals such as disinfectants and sanitizers were essential to prevent the spread. As more people were confined to their homes, finished goods were also sought after.

And of course, the world had a front row seat to the Ever Given crisis, which created a ripple effect of congestion that spread around the globe, causing an already-overburdened supply chain to all but implode.

Charter and freight rates

The current high charter rates are worrying for liners who rely heavily on charter vessels. With increased rates for smaller vessels, the length of the charter is also increasing as a result of the competition for vessels. Vessels chartered at today’s rates may make for painful costs with certain liners if the freight rates fall considerably by 2023-24.

Freight rates continue to match the charter rate trend and are still at all-time highs. Globally, freight rates are up over 300 percent on 2020 levels, with the Asia - North Europe trade currently posting a 569 percent year-on-year growth with little signs of abatement. Most analysts also expect the current trend is set to remain the same, at least into next year.

2022 Outlook

As the year draws to a close and the next major industry milestone of Chinese New Year following shortly after, high rates and significant port congestion show little sign of easing.

As an example, the port of Los Angeles and Long Beach started 2021 with 31 container ships at anchor per day awaiting a berth. The number dropped to a low of 10 ships in June and has risen ever since, hitting a maximum of 70 container ships in September. The impact was not just felt in Southern California, with the port congestion spreading to the other major US West Coast (USWC) ports of Seattle, Tacoma, Oakland and further north in Vancouver and Prince Rupert.

It took six months to reduce the number of waiting container ships by two-thirds. To do the same for 70 vessels is going to take considerably longer.

It is possible to clear congested ports, but it does take a considerable effort. The port congestion in Yantian started in late May 2021 due to an outbreak of COVID amongst its workforce. By June 21, there were 50 ships waiting for operations, down from a maximum of approximately 70 ships a week earlier. By July 6, the port was running at near-normal levels and the congestion incident was considered resolved by major carriers (even though secondary effects meant that nearby ports of Shekou and Nansha were impacted too).

With port congestion comes reducing schedule reliability by carriers. This impact is directly felt by the cargo owners, and they are starting to take matters into their own hands to secure cargo space. Large retailers such as Ikea and Walmart are chartering vessels to control their own cargo destiny. Whilst this trend of private chartering may be a flash in the pan, it is still a concern for many shipping companies who are already battling with the pressures of reducing fuel consumption and meeting emissions targets.

The multitude of issues today will not disappear overnight. As an industry, we need to take proactive measures to recover and prosper. The 2021 Guide to Port Call Optimisation explores solutions to help combat each of the challenges above and many provide opportunities for immediate return on investment, increased efficiencies and the ever-important reduction in fuel. Download your free copy here or visit the Intelligent Cargo Systems website for more information.

Emma Mark has spent the last decade championing new technology products and services to the maritime sector. Since 2019 she has spearheaded Intelligent Cargo Systems’ annual Guide to Port Call Optimisation, analyzing the marketplace and its challenges, and showcasing case studies of innovative solution providers, introducing shipping companies to products and services that help to reduce fuel and emissions. The 2021 Guide to Port Call Optimisation can be downloaded here.

Intelligent Cargo Systems is a London-based maritime technology company. Their CargoMate platorm offers unrivalled real-time port call visibility and automated assistance for vessel departure. Consisting of a team of maritime professionals and software engineers, Intelligent Cargo Systems utilizes emerging and proven technology to make ships more efficient and environmentally friendly.

This post is sponsored by Intelligent Cargo Systems.