{"id":23760,"date":"2024-07-23T11:22:46","date_gmt":"2024-07-23T08:22:46","guid":{"rendered":"https:\/\/fractory.com\/?p=23760"},"modified":"2024-11-11T12:14:51","modified_gmt":"2024-11-11T10:14:51","slug":"port-congestion-explained","status":"publish","type":"post","link":"https:\/\/fractory.com\/port-congestion-explained\/","title":{"rendered":"Supply Chain Issues: Port Congestion"},"content":{"rendered":"

Port congestion poses a significant challenge for shipping and delivery services<\/a> worldwide. Ports are vital hubs for moving goods, and handling tasks like customs clearance and transportation. When congestion occurs due to overload, it disrupts businesses and supply chains.<\/p>\n

Ports are crucial links in a country’s shipping network, connecting traders with a vast amount of goods. For example, the Oakland Seaport in Northern California serves over 14 million people annually.<\/p>\n

Congestion at ports impacts global shipping, affecting supply chains, economies and the environment. This article delves into its causes, consequences and possible solutions.<\/p>\n

What Is Port Congestion?<\/h2>\n

Port congestion occurs when ships cannot immediately dock upon arriving<\/strong> at a port to load or unload goods. Instead, they must wait at sea for an available spot. This issue affects approximately 70% of ports that operate 24\/7, including the world\u2019s top 10 major ports.<\/p>\n

The maritime logistics, freight and the shipping industry face significant disruptions in the global supply chain due to this widespread issue across container depots and terminals worldwide<\/p>\n

The problem has intensified<\/strong> with the growth of the container fleet, with its deadweight tonnage surging from 11 million metric tons in 1980 to about 293 million by 2022<\/strong>, including a 4.5% increase in 2021 alone. As a result, ships wait offshore for extended periods, causing container backlogs at ports and lengthy waits for trucks.<\/p>\n

The Impact of Port Congestion<\/h2>\n

In recent years, port congestion has become a significant hurdle for global trade, profoundly impacting global supply chains and the efficiency of goods movement. These congestions are caused by an increase in demand for goods, limited port capacity, and unforeseen events, such as pandemics or extreme weather events.<\/p>\n

Port Congestion Delays<\/span><\/h3>\n

One of the most noticeable consequences of port congestion is delays. The arrival of goods that were supposed to reach their destination port within a couple of weeks may now be postponed for several months due to a congested port.<\/span><\/p>\n

For example, during the COVID-19 pandemic, some of the world’s largest ports, like Los Angeles and Shanghai, experienced unprecedented levels of traffic. This global port congestion led to vessels waiting offshore for weeks, delaying the delivery of essential items ranging from medical supplies to consumer electronics. <\/span>Almost every business had to deal with shipment disruptions, inventory stock-outs, high freight rates, and production shutdowns.<\/p>\n

Supply Chain Disruptions<\/span><\/h3>\n

Port congestion also significantly impacts cargo flow. With vessels waiting to dock and unload, cargo gets stuck on these vessels, leading to shortages in markets and disrupting the procurement<\/a> of time-dependent materials.<\/p>\n

For example, automotive manufacturers in Europe and North America have faced parts shortages because their suppliers in Asia could not ship out on time due to port delays.<\/p>\n

The Suez Canal blockage<\/strong> in March 2021 is another prime example of how a single incident can have a massive impact. When the gigantic container ship Ever Given got stuck in the canal, it halted the flow of cargo between Europe and Asia for days. This blockage not only delayed the delivery of goods but also led to a significant increase in transportation costs<\/a>. The canal is a critical chokepoint, and any obstruction to it profoundly affects global supply chains and shipping routes.<\/p>\n

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Longer Inland Transit<\/span><\/strong><\/h3>\n

Longer inland transit times are another byproduct of port congestion<\/strong>. Once the vessel arrives and the cargo is offloaded, the next challenge is transporting it inland via trucks or trains. However, delays at the port often cause a ripple effect, congesting these inland freight networks as well.<\/p>\n

This situation was evident during the port congestion crisis at the Port of Felixstowe in the UK, where cargo took much longer to reach its final destinations across the country.<\/p>\n

In and near conflict zones like Yemen, Houthi attacks on shipping routes through the Red Sea<\/strong> have further complicated the movement of goods. Such disruptions can lead to longer transit times as shippers seek alternative and often less efficient routes to deliver goods. This not only increases the time products spend in transit but also elevates the risk of damage or loss, impacting overall supply chain reliability.<\/p>\n

Demurrage and Detention Cost<\/span><\/strong><\/h3>\n

Financial burdens, such as demurrage and detention<\/a> charges, also escalate due to port congestion. Demurrage charges occur when import containers are not picked up<\/strong> from the terminal after arrival, while detention fees are applied when containers are not returned empty to the port<\/strong> within the allotted free days. Consequently, businesses face increased operational costs as these charges build up, which are often passed on to consumers.<\/p>\n

Empty Containers<\/span><\/strong><\/h3>\n

The issue of empty containers also worsens congestion at certain ports. In many cases, shipping lines have difficulties relocating empty containers<\/strong> from regions with a trade deficit back to those with a surplus. This imbalance was notable in Australia, where carriers struggled to find enough containers to ship commodities like meat and grain overseas, significantly impacting their ability to trade efficiently.<\/p>\n

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