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Counting the cost of port congestion
American Shipper
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The liner shipping industry is facing unforeseen heavy port congestion and vessel delays worldwide. The situation is adding to the severe lack of tonnage, forcing carriers to blank sailings from China just at the time when these sailings could be generating record revenues.

The twin US ports of Los Angeles and Long Beach are the worst hit as they are receiving unprecedented volumes of imports just at the moment when COVID19 has reduced the number of dockworkers and truckers. Over 1,000 dockworkers in California tested positive for COVID-19 at the start of this week, up from 694 cases on 17 January.

Alphaliner identified 41 container ships at or near to the San Pedro anchorage awaiting a berth at the ning of this week, equivalent to a total capacity of 336,500 teu. Including the 27 ships already at berth on Monday 1 February, the total container fleet currently in the LA/LB area represents a capacity of no less than 579,100 teu, Waiting times for container ships now often exceed a week.

In order to continue to offer weekly sailings, carriers are being forced to ext the round voyage time of their services by at least a week, necessitating an extra ship per service. For the 29 Transpacific loops currently serving LA/LB, liner operators need to find an extra 7 neo panamax ships of 14,000 teu, 15 very large container ships of 8,000—11,000 teu and 7 units of 3,400—6,500 teu.

Chartering these 29 ships at current market rates in order to keep the services running would amount to a collective daily tering cost of USD 1,415,000 according to Alphaliner estimates. This extra cost is however purely ’hypothetical’ as the ter market remains sold out. The real cost of port congestion for the carriers is the loss of revenue from sailings that have to be cancelled due to a lack of tonnage. A typical VLCS taking a load of 4,000 x 40’ containers with spot cargo between Shanghai and Los Angeles would generate revenue of USD 16M from the headhaul voyage alone. Apart from the loss of revenue, the blanking of sailings also reduces the possibility to reposition empty 40’ containers back to China on the backhaul voyages.

All liner operators have added capacity on the Transpacific in the past six months except ONE (-8.8%). The Japanese carrier has moved some capacity to the Asia-Europe trade, but this has been more than compensated for by the alliance partners Yang Ming, HMM and Hapag-Lloyd, which have increased their capacity above the market average of 15%.

MSC has increased its weekly nominal Asia-North America capacity the most (+81.4%). The Geneva-based carrier has launched several new services outside the scope of the 2M VSA with Maersk with ships of up to 15,000 teu. This also explains why MSC currently has the largest number of big ships (7 neo panamax and 1 megamax) in the LA/LB area.

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