The resurgence of vessel queues outside major ports like Singapore, reminiscent of the Covid era, signals potential turbulence in a system that facilitates 45% of global trade by value.
This bottleneck is partly due to 6-7% of vessel capacity being removed from the market earlier this year as ships navigate longer routes to avoid Red Sea piracy. Lean inventory strategies relying on dependable logistics are at risk. Despite a record number of new container ships being delivered in 2024, the shipping system is struggling to cope with the demand surge, reminiscent of the Covid-induced disruptions.
The global container shipping system, a crucial cog in the machinery of international trade, is showing signs of stress reminiscent of the Covid-19 pandemic era. The return of vessel queues outside major ports like Singapore for the first time since the pandemic highlights underlying issues in a system responsible for transporting nearly half of the world’s trade by value. This congestion, exacerbated by the diversion of ships around the Cape of Good Hope to avoid attacks in the Red Sea, has effectively reduced market capacity and exposed vulnerabilities in lean inventory strategies.
The Re-emergence of Port Congestion
The reappearance of vessel queues outside Singapore and other major ports is a troubling indicator for the global shipping industry. During the Covid-19 pandemic, port congestion became a common sight, disrupting supply chains worldwide. The recent resurgence suggests that the industry has not fully addressed the weaknesses exposed during the pandemic. As volumes grow rapidly, these unresolved issues are once again coming to the forefront, leading to increased shipping costs and logistical headaches.
Impact of Longer Voyages
One significant factor contributing to the current congestion is the diversion of ships around the Cape of Good Hope. This route, although longer, is now preferred by many vessels to avoid the risks associated with the Red Sea, where piracy remains a threat. These longer voyages have effectively taken 6-7% of vessel capacity off the market, compounding the logistical challenges. The increased travel time not only reduces the availability of ships but also impacts container availability, further straining the system.
Record Year for New Ship Deliveries
Interestingly, 2024 is set to be a record year for new container ship deliveries, with 461 new vessels expected to hit the waters. Many of these ships are equipped to operate on zero-carbon fuel, marking a significant step towards sustainability in the industry. However, despite this influx of new tonnage, the system is still struggling to keep up with demand. Virtually no ships are currently idle or being scrapped, and charter prices have spiked, indicating a severe capacity crunch.
Volume Surge and Systemic Vulnerabilities
The surge in container volumes this year has been driven by a combination of factors, including inventory restocking, an early peak holiday season, and global economic growth. In the first quarter alone, container volumes increased by 9%. However, this growth is clashing with systemic issues that reduce overall capacity. Ships are frequently falling off schedule due to longer port stays, as they struggle to manage the increased volume of cargo. This leads to missed berthing slots and longer waiting times offshore.
The Role of Ports in the Supply Chain
Ports play a pivotal role in the supply chain, and their efficiency directly impacts the entire shipping system. During the pandemic, congestion at ports was a major bottleneck, with containers piling up due to issues such as a lack of trucking or warehouse space. This prevented ships from being worked at their normal pace, occupying limited berth space for extended periods. The current situation, though milder, points to similar unresolved issues. Inadequate visibility of cargo volumes and a lack of investment in surge capacity continue to hamper the system’s efficiency.
Lean Inventory Strategies at Risk
For companies relying on container shipping for their supply chains, the lesson is clear: the system remains fragile and vulnerable to external shocks. Lean inventory strategies, which depend on reliable and consistent logistics connections, are particularly at risk. Whether due to a pandemic, attacks on shipping routes, or a sudden volume surge, the system’s vulnerability is unlikely to disappear. Companies must recognize this inherent risk and adapt their strategies accordingly to mitigate potential disruptions.
In conclusion, while the global container shipping system is not entirely running out of capacity, it remains highly susceptible to disruptions. The recent resurgence of port congestion, driven by longer voyages and systemic inefficiencies, highlights the fragility of the system. Despite a record number of new ships being added this year, the industry is struggling to cope with the demand surge. Companies relying on container shipping must acknowledge these vulnerabilities and consider adaptive strategies to safeguard their supply chains against future shocks.
“The system’s vulnerability is unlikely to go away. Lean inventory, or ‘just in time’ strategies which depend on reliable and consistent logistics connections, will always be vulnerable.” – Industry Expert
For businesses dependent on global shipping, it’s crucial to stay informed about potential disruptions and adapt strategies accordingly. Contact us today to learn more about safeguarding your supply chain.
