Friday, May 29, 2015

Freight Delays at Ports are not Just Caused by Container Lines Shipping Alliances and Bigger Ships

WSC Speaks Out on Complexities of Congestion
Shipping News Feature

US – WORLDWIDE – Concerned that some within the logistics industry are expressing the view that the rising size of container ships, coupled with the plethora of vessel sharing alliances, are contributing largely to port congestion in the US, Europe and Asia, the World Shipping Council (WSC) has produced a short paper to open up the matter for discussion. The WSC says delays to freight on the US West Coast in late 2014 and early 2015 due to labour disruption has been another factor pushing the matter of congestion to the forefront.

The WSC points out that there are numerous factors to be taken into account which include, not only labour problems leading to further delays such as the chassis inspection contracts on the West Coast, plus the trend toward ever larger ships, but also unanticipated surges in cargo volumes etc. and the influence of the prolonged spells of bad weather which affect many of the major global ports.

The report goes on to analyse the reasons for building ever larger container vessels, a combination of rising fuel and other costs, economies of scale, better operational efficiency etc., whilst environmental regulations only amplify the reasons for the industry to utilise bigger and more efficient ships with less emissions per TEU produced on average. This factor is of course likely to play an even larger part in the calculations as time passes and the Green agenda grows in importance.

Concerning the rise of multi-partner vessel sharing agreements and alliances the WSC points out that historically this type of agreement has always given more efficient performances both for ship operator and customer. They have of course however often also drawn the attention of regulators concerned with antitrust issues. Additionally, as we have pointed out many times before, larger ships are only more efficient if they are running at near carrying capacity, alliances tend to help with this by filling scheduled vessels rather than running individual services.

As the WSC notes the prevailing trend in container shipping since 1970 has been the increasing size of container ships. The average size of new containerships delivered in the 1970s was 1,100 TEU, as of April 2015 the average size of new containership orders is 7,900 TEU. More than half of the containerships on order are larger than 5,000 TEU and regular readers will be familiar with the fact that virtually every major box carrier is now investing in 18,000 + TEU vessels.

In assessing a physical resolution to the problem of port congestion, the WSC covers the mechanics of handling lower numbers of large, rather than more small, containerships and emphasises the need for other essential elements, larger cranes, amiable labour force etc., being in place. Many of the current ports may also not have sufficient acreage to handle an increase in the numbers of boxes being transferred and stored, no matter how much they invest in infrastructure. Problems, such as those faced over the US Highway Trust Fund we featured recently, only exacerbate the matter, with road and rail links needing an upgrade as well as port equipment and practices.

The fact is that ports worldwide have always had to adjust historically to changing conditions and London is an excellent example of this. For centuries the leading trade port in the UK it helped build the city’s prominence through sea borne trade until, in the 1960’s, its position diminished due in the main to labour troubles, the growth of containerisation and with the repeal of the Dock Labour Act, as shippers and freight forwarders had the option of stuffing and unstuffing boxes themselves, away from the uneconomic option of the port with its restricted hours and high handling tariffs. This led to the growth of ports such as Southampton and Felixstowe, still the country’s premier port, where labour and other costs were substantially lower and transfer of boxes faster, whilst London’s Docklands represented an opportunity to release prime real estate with the closing of the traditional wharves.

Now, as shipping costs remain a key factor, London is gradually regaining ground with ports at Tilbury and Thamesport, and may even achieve primacy once again if DP World’s London Gateway development can prove its boast as a faster, cheaper option for customers across much of the country.