Dive Brief:
- A 40% increase in delays for container ships at the Yangshan port near Shanghai have been building since early April, when new alliances began, JOC.com reported Thursday. Heavy fog, common to the region, is also contributing to the overflow.
- In further reporting, JOC.com cites a freight forwarder who anticipates congestion affecting the Asia-Europe, Trans-Pacific and Asia-Australia trade lanes could last weeks. The forwarder also guessed the congestion may be due to a rush to book shipments for before May 1, when rate increases are announced.
- Recent Alphaliner data shows the new alliances are deploying 918 ships on three East-West routes, down form the 938 ships deployed in August, while increasing capacity by 5% due to a preference for larger vessels.
Dive Insight:
Port congestion is nothing new to the supply chain, but the reasons behind it are all but normal and may point to further problems worldwide as the new shipping alliances continue to roll out their services.
The three major shipping alliances — 2M+H, Ocean and THE Alliance — represent 69% of global container capacity and the top 14 current major carriers (pre-consolidation). The most recent round of industry consolidation follows a tumultuous period for ocean shipping where historically low rates coupled high-debts spurred by a large-vessel-order race to bankrupt the then-seventh-largest carrier and roil supply chains.
In order to secure higher returns, increase efficiency and capture a greater market share, or simply to compete, the industry chose over the past year to reorganize and consolidate in a series of deals that took effect April 1, 2017. On paper, each carrier simply changed their services, but in practice ports, shippers, forwarders and carriers were all forced to adjust to a sudden sea change. Everyone knew it was coming, but few could avoid short-term disruptions given a widespread lack of coordination.
The Shanghai port congestion serves as one of the best examples so far. Carriers' new services means more, larger ships would call on the port, but the port was apparently not fully prepared to manage the increased volume to load and discharge. Labor and equipment are fixed assets, after all, and cannot be modified easily. Meanwhile, as JOC.com reported, shippers may have simultaneously increased orders and shipments to pay current rates before contracts expire. Independently, each of these factors could have led to delays, but add to all of that inclement weather, and weeks-long delays ensue.
The Shanghai port is unlikely to be the last to face such phenomenons as supply chains adjust to new alliances, so stakeholders should take note and expect similar events worldwide in the coming month.
