Increased Online Spending, Demand, Congestion, the Busiest Ports in the World and How the Shipping Industry is Handling the Pandemic

Today over 750 million containers – measured in 20-foot equivalent units (TEUs) – are moved through almost 900 container ports across 141 countries each year. With the pandemic increasing the amount of time spent at home through lockdowns, this has resulted in a pandemic-led boom in online shopping for the option of next day delivery in high demand.

According to data from the United Nations, in Australia, the online retail sales were $13.5 billion in 2018 and in 2020 this rose to $22.9 billion.

But what does this mean for the shipping industry?

The shipping industry has struggled to keep up with the increased cargo demand with Covid-19 border restrictions, distancing requirements and factory closures have all wreaked havoc on traditional supply chains, leading to soaring freight rates on the main shipping routes.

At the current moment, AIS data from VesselsValue shows around 50 containerships at anchor near Ningbo-Zhoushan Port, where operations at Ningbo Meishan Port Terminal remain halted for the sixth consecutive day, after a member of staff tested positive for Covid-19. Shipping operator CMA CGM said it is rerouting some of its ships to Shanghai, which is about 130 miles north of Ningbo, but Shanghai is already congested.

How vital is the Ningbo-Zhoushan Port to the shipping industry?

Container volume at Ningbo-Zhoushan port at the end of 2020 was 28.72m TEU, an increase of 4.3% year-on-year, making it one of the three busiest ports in the world following Shanghai and Singapore. Meishan Port Terminal, where operations have been suspended, is a newly built area of the expanded Ningbo-Zhoushan port and is its second mega-terminal, with capacity for 10 million containers.

So you’re saying Shanghai and Singapore are the busiest ports in the world?

Shanghai port retaining the title of the world’s busiest container port for the 11th year in a row hit a new record of container volumes handled of 43.5m TEU in 2020,

In Singapore, 36.9 million TEU’s passed through the Port of Singapore in 2020. Port of Singapore is called by 125 liner shipping services that sail beyond Asia, in addition to dozens that strictly call Asian ports.

Shipping Industry - Singapore Port
Singapore Port

Wait, did you mention something about port congestion?

About 350 containerships capable of carrying almost 2.4m 20ft boxes are waiting off ports globally, according to VesselsValue. The congestion around the globe has been getting worse with idle capacity reaching 4.6 per cent of the global fleet, up from 3.5 per cent last month.

As mentioned above there are quite a few ships waiting outside the Ningbo-Zhoushan Port to be unloaded and some shipping lines have been rerouting to other Ports nearby. Ports in nearby Shanghai are seeing the worst congestion in at least three years with approximately 30 vessels queuing outside Yangshan port.

The latest bottlenecks follow massive disruptions to container handling in China when the ports of Shanghai and Ningbo were already heavily congested, following the impact of Typhoon In-Fa in July forcing the closure of Shanghai’s container port. This disruption followed the 3 week closure of Yantian port due to a Covid-19 outbreak in June. This caused 20,000 TEU to be backlogged in the port, with some sources saying as many as 50 or 60 ships were anchored out waiting.

“If the port closure is a long one, then knock-on effects will be felt, as the other terminals in Ningbo can’t fully absorb a longer closure of Meishan. This would be similar to what we saw in Shenzhen when Yantian was closed – other terminals did their utmost to compensate, but could not take up the full lost capacity.” A UK Forwarder has said.

So what happens from here?

We don’t believe the congestion and high freight rates are going to go away any time in the near future, especially with the peak season approaching quickly. With Christmas just around the corner, it is hard to see that the online retail spending will be lessening in the near future either.

“We already for a couple of months have said that 12 months from now we may see somewhat of a normalised market. I think that 12 months is still ahead of us to the extent that what we have seen in those previous two months has been still an escalation of those supply chain dynamics.” Peter Sand from BIMCO, the world’s largest direct-membership organisation for shipowners, charterers, shipbrokers and agents said.

“That’s not working towards an easing of the crunches, it has simply made the supply chain crunches tougher to deal with and that to us explains the most recent hike in freight rates. For the shippers it will still be quite costly, at least compared to pre-pandemic levels to ship goods around the world, but for the liner shipping companies it’s certainly windfall profits.” Sand said.