Shipping delays, higher freight rates: Ports in Asia, including Singapore, see heavy congestion

SINGAPORE: Shipping delays in Singapore have more than doubled in recent weeks, which observers said could mean higher prices for consumers.
 
This comes as a shortage of container ships as well as port congestion have led to an impending supply chain crisis.

Port operator PSA Singapore said it is working closely with shipping lines to mitigate disruptions, adding that it is communicating with vessels on their arrival times and volume information in advance.

PSA said the volatility is likely here to stay, and that it will continue to ramp up capacity and smart technologies in their terminals.

IMPACT OF BIDEN’S BIG CHINA TARIFFS

The bottlenecks at Singapore are due to various factors, from the diversions caused by unrest in the Red Sea to Chinese exporters scrambling to ship goods ahead of trade curbs, said observers. 
 
Earlier this month, the United States announced that it will raise tariffs on US$18 billion worth of imports from China, targeting strategic sectors such as electric vehicles (EVs), batteries, steel and critical minerals.
 
The tariff rate on EVs is set to quadruple to 100 per cent this year, while the one for semiconductors will surge from 25 per cent to 50 per cent by next year, said the White House on May 14.
 
Chinese exporters are now in a mad rush to beat the looming trade restrictions.
 
Average container prices in China, which were already on an uptrend, have spiked even further by 88 per cent in the last two months.
 
Typically, these ships take routes like the Strait of Malacca, where they will dock in Singapore. 
 
But the growing volume of vessels has caused heavy congestion. Currently, it takes around seven days for each vessel to be berthed, instead of one to two days previously.
 
So far this month, Singapore’s port has already received about 1,000 ships, compared with just 639 in April.

The Maritime and Port Authority of Singapore (MPA) has described the volume of vessel arrivals since the start of 2024 as a "significant increase".

From January to April, the monthly average tonnage of container vessel arrivals reached 72.4 million gross tonnage (GT), up by more than one million GT, compared to the same period in 2023.

The overall vessel arrival tonnage in Singapore, which also includes bulk carriers and tankers, grew 4.5 per cent year-on-year to reach 1.04 billion GT in the first four months of 202, said MPA on Friday (May 31).
 
Mr Tan Hua Joo, a container shipping market analyst at data platform Linerlytica, told CNA that port congestion is at an all-time high.
 
“There isn’t a lot of spare capacity available to accommodate the increase in volumes,” he said.
 
“Port users will therefore need to build in delays to their cargo movements and forecasts in the next few months.” 
 
As vessels remain at sea for longer periods of time, exporting countries are faced with a shortage of ships and container equipment.

RED SEA DISRUPTIONS

In a statement on Thursday, MPA said that Singapore is experiencing a “bunching” of vessels as a result of vessels being diverted away from the Red Sea.

“The diversion of vessels around the Cape of Good Hope has disrupted vessel arrival schedules at major ports around the world with off-schedule arrivals and has caused a ‘vessels bunching’ effect,” it said in response to media queries.

“Since the beginning of 2024, Singapore has seen a significant increase in vessel arrivals.”

Container vessels are facing longer waits for berths as a result of this, the authority said.

“While most container vessels are berthed on arrival, port operator PSA has worked with liners to adjust arrival schedules where feasible, and where this is not feasible, the average waiting time for container vessels is about two to three days,” it added.

MPA said that several container lines are also “discharging more containers in Singapore as they forgo subsequent voyages to catch up on their next schedules” while the number of containers handled per vessel has also increased.

Additionally, PSA has been helping some container lines manage their container stowage on board vessels “to facilitate expeditious discharge of cargo for their subsequent port calls”.

MPA said that it has been working with the Ministry of Transport (MOT), PSA and other industry players to prepare for higher numbers of vessel arrivals since late 2023.

“PSA has since added more manpower and container handling capacity to help alleviate the situation,” MPA said.

“For instance, PSA has reactivated older berths and yards that have previously been decanted at Keppel Terminal.”

Three new berths at Tuas Port will also commence operations later this year, supplementing the eight existing berths there.

The authority said that other vessels calling in Singapore – about two-thirds of vessel arrivals – are not experiencing berthings delays, adding that there is currently no crowding in the country’s anchorages.

“MPA and PSA are collaborating closely with container lines and regional feeders to inform them about berth availability and advise on arrival times to reduce berthing delays,” MPA said.

LEFT WITH “LITTLE OR NO SPACE TO SHIP”

For freight forwarders of large products like cars, the price to ship their goods has risen three-fold. 
 
This means they have to either absorb costs, or pass them down to consumers, said observers. 
 
“We are left with little or no space to ship,” said Ms Pelaris Cheng, managing director of Singapore-based freight forwarding firm Hermes Logistics. 
 
“That’s why we have to beg the carriers to give us some space, (without even talking about) the price.”
 
She told CNA that the vessels are “too full to accommodate our cargo”. 
 
“They are over tonnage, because China’s cargo loading is so much that they already took out, I think, most of the space in the vessel,” Ms Cheng added. 
 
“So we are left with very little space left. We only prioritise those that are very urgent to ship, and it is at a premium price, like three times what we usually pay.”

MANUFACTURING, E-COMMERCE AMONG HARDEST HIT SECTORS 

Analysts said the situation could last for months as it also affects neighbouring ports in Southeast Asia. 
 
Professor Lawrence Loh from the National University of Singapore Business School believes some sectors in Singapore are expected to come off worse from this supply chain disruption.
 
They include firms in the manufacturing industry, especially those involved in producing heavy goods such as consumer electronics or EVs. These manufacturers usually rely on sea freight to send and receive the raw materials needed to produce their products.
 
E-commerce firms could also take a hit, said Prof Loh. 
 
Businesses selling larger household items like furniture will face delays, while those selling smaller items may have to turn to costlier ways to ensure their products reach customers in a timely manner.
 
“One alternative is for vendors or consumers to switch from sea freight to air freight, but that will actually increase the cost. Air freight normally costs about five to 20 times more than sea freight, depending on the weight as well as the size configuration,” said Prof Loh. 
 
“I think air freight cannot be a substitute for all. Maybe for smaller parcels, it’s still possible, but as a general substitute. I think sea freight is here to stay. We still need maritime transportation.”
 
He added that if the US’ tariff hikes on China spark a tit-for-tat escalation, the price increases would be broader and last even longer. 

CONTAINER SHORTAGE COULD WORSEN INFLATION

Economist Barnabas Gan said the ongoing container crunch, coupled with higher growth momentum, are likely to put upward pressure on inflation in Singapore.
 
While prices were expected to ease in the second half of this year, that outlook has become more uncertain, he noted. 
 
“We will also likely see higher food prices and higher transport prices, led by higher energy prices in the foreseeable future,” said Mr Gan, acting group chief economist at RHB Bank. 
 
“More importantly as well, commodity prices will start to rise, especially when Chinese trade starts to accelerate in its activities into the rest of this year.”