‘Systemic’ China port congestion to spread

In the same week that Yang Ming gets ready to resume trading in its shares, the Federal Maritime Commission have intervened in the proposed merger of the Japanese shipping lines and now analysts are suggesting that China port congestion may actually be systemic and here to stay.

While shares in Taiwanese container line Yang Ming will resume this morning on the Taiwan Stock Exchange, at more than twice their value before their suspension two weeks ago, things are not so bright for their Japanese Alliance partners.yang ming3

The US Federal Maritime Commission, who had already interceded in the planned merger of NYK, K-Line and MOL Lines, barring them from sharing information in advance of the merged business entity being created, have now announced that the proposal is outside their jurisdiction and that the U.S. Justice Department would be responsible for approving the deal.

Delaying any resolution, the FMC ruling does not affect an eventual DOJ decision on the matter, which is likely to end favourably in due course.

The same cannot be said for the ongoing port congestion in China, which is now spreading further afield.

Shanghai port’s attempt to alleviate congestion have failed to any great effect, with our Shanghai office confirming that vessels are waiting up to four days to load and disruption is spreading to Qingdao and Ningbo, with very real fears that it will disrupt port and feeder operations across Asia in the short-term.China port congestion

Previously attributed to fog, shippers pushing movements ahead of May increases and vessel repositioning for the New Shipping Alliances, industry experts are now suggesting that primary contributing factors may actually be the increased use of larger ships, increased global demand and China’s move towards a more consumer-driven import economy, which has seen volumes rise 6% in Q1 at China’s top 10 container ports.

The experts contend that even without any of the above factors coming into play the ports would have struggled to maintain performance, simply under the weight of their extra business: with Qingdao growing 12%, Shanghai 10% and Ningbo 9% in the first quarter of 2017.

Illustrating this point and the impact of larger vessels Drewry’s have asserted that Shanghai’s workload actually lightened as there are fewer deep-sea services calling at the port in April than in March, or indeed even April 2016, but that even with fewer services, the average size of ships the port has to turnaround has grown by 6% in the course of the year to 8,600 teu.nyk-line_0

In general, the deployment of bigger ships results in lower frequency services and greater volume peaks – when traffic arrives in fewer, larger tranches – that stretch the manpower and yard capacities of ports and terminals.

As fewer terminals are able to accommodate the bigger ships, the operational difficulties faced by ports and terminals gets progressively more localised, as more traffic heads to facilities that can do the job.

The underlying concern is that while some degree of congestion in already-under-strain ports was inevitable. These are transitional problems that will pass, but the fact that congestion has spread to other ports along the Chinese coast may suggest that something else is at play.

The 20,568 teu Madrid Maersk

The 20,568 teu Madrid Maersk

China’s attempt to move towards a more consumer-driven import economy is beginning to impact with import growth outpacing exports by 1.8% in 2016. This fast-growing intake of imports could well be one of the primary factors putting pressure on yards in China, that have never had to worry about the dwell time of inbound containers.

The danger for shippers is a longer-term trend that, unless remedied by more capacity (to both terminals and yards), will continue to put pressure on ports that are already close, if not exceeding, their maximum utilisation levels.