Port Congestion Disrupts Intra-Asia Trade Routes, Cargo Backlogs, and Capacity Shortages

The knock-on effect of global port congestion is causing serious damage to trade routes within Asia, with a large amount of cargo stranded in the transshipment hub in the southeast.

Peter Sundara, head of global shipping for a large cargo owner, said that transhipment cargo from Europe, Africa, Oceania and the United States is being dumped, especially in Singapore.

Peter Sundara said: “This is not a problem of port productivity, but feeder ships and mainline ships are unloading, but the mainline ships that are not connected to feeder ships arrive at the port on time to load container cargo.”

At the end of last month, the Port of Singapore Authority (PSA) was forced to open the storage area of its Tuas large container terminal under construction to store containers in order to deal with the problem of a large backlog of containers.

Sundara pointed out that although the delay of mainline ships has caused the transshipment cargo to be stranded in Singapore, the chain effect of congestion is also affecting the intra-Asia branch line transportation.

"For example, in Indonesia, supply chain congestion caused delays on feeder ships from Jakarta to Singapore. Indonesia, Thailand and Vietnam are facing chronic shortages of containers and insufficient space," Sundara said.

But Sundara said that given the demand from China and the decline in freight rates, he hopes that shipping companies can quickly inject more capacity into Southeast Asia.

"Vietnam has lifted the blockade, there is a lot of suppressed production, and the demand is huge," Sundara said. "Therefore, now is the best time for operators to increase capacity, because after the power cut, China's production capacity has slowed down."

Wan Hai Shipping has transferred some of its trans-Pacific shipping capacity back to the Asian internal market to meet the soaring demand for capacity in Vietnam and India, but it remains to be seen whether any mainline shipping companies will follow suit.

However, shipping companies quickly cancelled routes from China. For example, the Ocean Alliance recently cancelled 21 trans-Pacific eastbound routes and 2 Asia-Northern Europe routes.

"We understand that due to China's electricity curtailment measures affecting export production, and the serious congestion of US and European ports, which disrupted their shipping schedules, shipping companies may cancel voyages." Sundara added.

"Another possible advantage of blank sailing for shipping companies is that it prevents further declines in freight rates, thereby providing a benchmark for upcoming contract negotiations."

In addition, Sundara said that this may only be a short-term fluctuation in China's freight rate. Given that the inventory in the United States and Europe will need to be replenished, and the freight peak of the Chinese New Year is approaching, China's freight rate will soon rise again.