Singapore's container port is experiencing its worst congestion since the COVID-19 pandemic. This disruption is a consequence of ships rerouting around Africa to avoid attacks by Yemen's Houthi group in the Red Sea. The situation is causing delays and bottlenecks in ports across Asia and Europe.
Disrupted Schedules, Surging Costs
Retailers, manufacturers, and other industries reliant on large cargo ships are facing rising costs, port backups, and empty container shortages. This comes as many businesses prepare for the peak year-end shopping season by building inventory.
Global Congestion at 18-Month High
Data from maritime firm Linerlytica reveals that global port congestion is at an 18-month high. As of mid-June, over 2.4 million twenty-foot equivalent container units (TEUs) were waiting at anchorages, with 60% located in Asia.
Shifting Routes, Strained Hubs
Unlike the pandemic-driven congestion, this situation is caused by disrupted shipping schedules. Vessels are taking longer routes around Africa to avoid the Red Sea, leading to larger cargo volumes being unloaded at major transhipment hubs like Singapore. This is causing delays as ships offload and reload cargo for the final leg of their journeys, skipping subsequent voyages to catch up on schedules.
Singapore Feels the Squeeze
Singapore, the world's second-largest container port, has seen particularly severe congestion in recent weeks. Average wait times to berth a ship have jumped to 2-3 days, compared to the typical less-than-a-day wait. Neighboring ports are also experiencing backups as some ships bypass Singapore.
Measures to Ease Pressure
Singapore's Maritime and Port Authority (MPA) is taking steps to address the congestion. Port operator PSA has reopened older berths and yards to increase capacity, and plans to open more berths at Tuas Port.
Early Peak Season Exacerbates Issues
The annual peak shipping season has arrived earlier than expected, further straining ports. This seems driven by restocking activities, particularly in the U.S., and by earlier shipments to meet anticipated demand.
Container Rates on the Rise
Container freight rates have surged, raising concerns about another inflation spike. Rates had stabilized in April, but significant increases were reported in May, driven by a surge in ocean freight exports of Chinese goods like e-commerce items, electric vehicles, and renewable energy products.
US Consumers Drive Demand
U.S. container import volume at the 10 largest seaports has risen 12% in May, fueled by the second-highest monthly import volumes since January 2023. This suggests continued strong consumer spending in the US, prompting retailers to stock up.
Europe Feels the Pinch Too
Ocean imports into Europe from Asia also indicate an earlier peak season, pushing freight rates to 2024 highs. Container freight prices from Asia to the U.S. and Europe have tripled since early 2024.
Potential Causes and Consumer Impact
Some experts believe the congestion at Chinese ports might be partly fueled by US importers rushing to purchase Chinese goods before tariffs increase in August. However, the Council of Economic Advisers clarifies that these tariffs would only affect about 4% of Chinese imports to the US. Additionally, concerns about potential US port strikes and ongoing strikes in Germany are contributing to the overall gridlock. These disruptions are likely to translate to higher prices for consumers.
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