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Cause and Effects of Port Congestion on Freight Shipping

Published by Joe Webster.

What's in this article?
  1. Port Congestion and Its Causes
  2. Considering Congestion Causes and Its Consequences
  3. Assessing the Impacts of Current Conditions
  4. Effect Do Congested Ports Cause Higher Shipping Costs?
  5. How to fix import surge and port congestion problems
  6. New Consumer Habits and How To Navigate Them
  7. Dealing with Potential Port Issues
  8. Conclusion
Cause and Effects of Port Congestion on Freight Shipping

The world's ports are facing congestion problems because of overcapacity. This problem is caused by the increasing number of vessels entering port and the growing global demand for goods. In addition, there is a lack of capacity in some parts of the world.

Many types of terminals are categorized based on the type of cargo handled. These include container terminals, bulk terminals, breakbulk terminals, RORO terminals, etc.

Container terminals handle containers, while bulk terminals handle large quantities of raw materials such as grain and ore. Breakbulk terminals handle smaller loads of general freight. RORO terminals handle roll-on/roll-off vehicles.

The most common form of containerization is intermodal transportation, which involves transporting products via multiple modes of transportation within one shipment.

Containerization has revolutionized international trade. Before containerization, it took weeks to move goods across oceans. Today, container shipments cross the ocean in just days. However, the increase in volume has led to congestion problems.

According to the International Association of Maritime Transport Associations (IAMTA), the world's busiest container ports are in Hong Kong, Shanghai, Singapore, Rotterdam, Los Angeles, New York, Antwerp, London, Hamburg, Osaka, Tokyo, and Kobe.

In the Middle East and North Africa, Dubai's port is the largest container port. Other major container ports in the region include Jeddah, Dammam, Doha, Muscat, Beirut, Alexandria, Tripoli, Alexandria, Kuwait City, Bahrain, Abu Dhabi, and Sharjah.

Port Congestion and Its Causes

The term "port congestion" refers to the situation where too many ships are waiting to dock or to unload simultaneously. Port congestion creates bottlenecks that slow down the process of loading and unloading cargo.

A container yard cannot load all the containers at once if it is overbooked. The number of containers that can be loaded each hour declines if the terminal isn't operating at full capacity.

During transit, a ship may sink. When the amount of cargo being transported increases, the chances of accidents increase.

In addition to the above factors, the Covid-19 pandemic affected production levels of both the ports and the companies handling goods.

cause-and-effects-of-port-congestion-on-freight-shipping-02.jpg

Considering Congestion Causes and Its Consequences

As mentioned earlier, the leading cause of port congestion is the increased number of ships arriving at the port. There are four reasons why this happens:

1) Overcapacity – Ports have been built on the assumption that they will not face any problems. As a result, they were designed to accommodate more than what was needed.

For example, when the Panama Canal opened, it had room for only three ships at a time. Nowadays, it can handle up to seven ships at a time.

2) Demand growth – More people want to buy goods from other countries. Demand growth means that more ships need to travel to deliver demanded goods.

3) Political pressures – Political pressure cause economic slowdown. Economic slowdown leads to port congestion, which in turn affects many industries.

4) Excess of empty containers – Even with an influx of exports, many empty shipping containers are sitting in ports across the globe. Empty containers are causing port congestion which leads to container rollovers.

A lot of countries face a similar issue with port congestion. Empty containers can lead to container rollovers.

Cargo rollovers occur when there is too much or too little cargo at ports worldwide due to either oversupply or undersupply.

Rollovers occur when carriers fail to forecast correctly and/or because carriers don't consider how much cargo is needed. These events lead to delays which could cause revenue losses for both parties.

These four factors make it difficult for ports to keep pace with customer demand.

Assessing the Impacts of Current Conditions

Port congestion is impacting all parties involved in the global shipping industry. Everyone feels the effects of delays due to port congestion, from shippers to freight forwarders, brokers, carriers, and ports.

With cargo volumes expected to increase over the next five years, shippers must understand how current conditions affect their businesses.

In addition, freight forwarders must analyze the impact of port congestion on their customers.

Effect: Do Congested Ports Cause Higher Shipping Costs?

Despite a growth in the volume of international trade, the cost of shipping goods worldwide keeps rising.

Increased costs result from rising demand for products, increased competition among shippers, and growing costs associated with transporting cargo. But what are some factors contributing to these increases?

According to the World Bank, one main reason shipping rates increase is because there are too many ships on the water.

In fact, according to data from the International Maritime Organization (IMO), the number of vessels plying the oceans has grown substantially over the last several decades.

At the same time, the amount of space available in the ocean has remained relatively constant.

Does this affect the cost of shipping? In short, the answer is yes – it causes higher shipping costs. A recent report by the IMO found that the average container ship uses about 3.5 cubic meters per ton of capacity.

If you compare this to the average vessel built in 2000, which used 2.8 cubic meters per ton, you can see that the size of modern container ships has increased steadily since then.

Meanwhile, the total tonnage carried by sea has actually decreased.

port-congestion-causes-consequences-and-impact.jpg

How to fix import surge and port congestion problems

Port congestion is an issue across industries and ports around the world. Social distancing measures have caused delays in shipments and transportation throughout the supply chain.

Companies have trouble finding qualified staff due to the low number of job opportunities during the pandemic.

And drivers and carriers are struggling to keep up with the volume of freight moving through the system.

Automation and digital technology can help solve some of these issues. A few examples include:

  • Automatic identification systems (AIS): These devices use radio frequency signals to track ships and vehicles. They allow ships to communicate with each other and with shore stations. Communication helps prevent collisions and increases efficiency.
  • Electronic load boards: Load boards display information about where cargo is located, what it weighs, how much fuel it uses, and how long it takes to unload.
  • Robotics: Robots can perform manual tasks such as loading and unloading containers. They can also assist in handling dangerous materials like chemicals and radioactive material.
  • Remote control: Container cranes can operate autonomously without human intervention. They can lift heavy loads and move large objects over short distances.
  • Autonomous trucks: Self-driving trucks can travel longer distances while avoiding traffic jams. They can also navigate complex environments and handle multiple deliveries simultaneously.

New Consumer Habits and How To Navigate Them

Over the past ten years, consumer behavior has undergone significant change.

As consumers become increasingly tech-savvy, digital tools are helping shippers and carriers make sense of the changes.

These tools include mobile apps, e-Commerce platforms, social media channels, and data analytics software.

Digital tools can help shippers understand where demand is coming from and whether it is shifting. They can also help carriers better forecast capacity needs and plan for future growth.

Fast adaptation is necessary for shippers and carriers to meet shifting consumer needs. Adaptation includes adjusting staffing levels, increasing automation, and leveraging technology.

Dealing with Potential Port Issues

The Covid-19 pandemic has put the world economy in unprecedented difficulties.

While it is too early to tell whether the virus will cause long-term damage to the global economy, there are already signs that some countries could face serious problems.

To help companies survive and thrive in the current economic environment, decision-makers must address potential port problems.

Problem resolution entails addressing the short-term needs of the supply chain while preparing for what lies ahead.

all-about-port-congestion.jpg

Conclusion

Despite the declining trends, some positive developments are still occurring within the container shipping industry. For example, we see a rise in demand for intermodal transport.

Since trade is becoming more globally interconnected, this tendency will likely persist in the future.

The expansion of the inland waterways network is another element influencing the rise in demand for intermodal transport.

Finally, introducing new technologies such as autonomous vehicles could also lead to further increases in cargo volumes.

Overall, the container shipping industry continues to face many challenges. These include the decline in shipbuilding activity, rising fuel costs, and the need for greater efficiency among carriers.

In addition, there is a lack of skilled labor, especially in the areas related to technical maintenance and repair.

However, despite these difficulties, the container shipping industry will likely remain strong throughout the next decade.

This is mainly because of the continued growth of global trade and the need for efficient transportation of goods across long distances.

At A-1 Auto Transport, we offer comprehensive shipping services to meet the needs of your business.

As one of the premier shipping companies in North America, we have years of experience shipping domestically and internationally.

Contact us today to inquire about our heavy equipment shipping services. We look forward to hearing from you!

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Joe Webster always knew the auto transport industry would be a great career option. And with decades of experience, Joe is now an established consultant for A1 Auto Transport.

Joe was born in Santa Cruz, California. During high school, Joe worked as a mechanic; a job continued to work part-time during his bachelor's degree.

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A-1 Auto Transport is a disclosed agent for the following shipping companies:

CSI Logistics
435 Division Street
Elizabeth, NJ 07201
FMC 22206
Intl Cargo
45 Campus Drive
Edison, NJ 08837
NO. 17858N
Trans Global Auto Logistics, Inc.
3401 E Randol Mill Rd,
Arlington, TX 76011
NO. 018191NF
CFR Rinkens
15501 Texaco Avenue
Paramount, CA 90723
NO. 013055NF
ABC Worldwide LLC
2840 NW 2nd Ave #105
Boca Raton, FL 33431
NO. 025472F
ShipYourCarNow LLC
1160 South Rogers Circle Suite 1
Boca Raton, FL 33487
NO. 025646
Merco Air & Ocean Cargo, Inc.
6 Fir Way
Cooper City, FL 33026
NO. 021869F
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