Congestion in China

9th May 2017

Congestion in China

 

Chinese ports are currently encountering a nasty bout of congestion brought on by a number of coalescing factors. Bad weather, the restructuring of alliance networks, ever bigger ships and shippers’ eagerness to move cargo ahead of planned rate increases have all been mentioned in dispatches as the reasons why ships are being kept waiting outside ports and for slower than usual turnarounds.

Another, more mundane, factor is simply that they are struggling under the weight of extra business. China’s top 10 ports collectively experienced a 6% year-on-year jump in throughput in the first quarter of 2017. It’s unlikely to be a coincidence that the ports facing the worst of the congestion registered the biggest gains: Qingdao (12%); Shanghai (10%) and Ningbo (9%).
Some of these issues, such as the fog and alliance teething pains, will pass over soon enough, but will that reduce the probability of future congestion in some of the world’s busiest container ports?

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. This is a universal trend and not specific to Shanghai, but it will not get any easier as the size of ships continues to grow. 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.

 

One theory is that Chinese ports are experiencing a sudden spike in traffic because shippers want to move cargoes ahead of expected spot rate hikes and higher annual contract terms to Europe and North America that will kick-in around May. There might be some validity to that theory, but an examination of recent trade statistics shows that China’s demand resurgence is not an overnight flash in the pan with a significant increase to both exports, and especially imports, seen since August of last year.

Having been such an export driven economy for so long, China’s ports have tended not to be over-taxed by long dwell times in terminal yards as boxes tend to be swiftly loaded onto ships for export. However, the fast-growing intake of imports could well be putting hitherto unseen pressure on yards in China that as yet they have not adapted to. This has the hallmarks of 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 beyond, their realistic maximum utilisation levels.

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