Singapore port congestion may persist until year-end

Ships have had to wait for one to two days to berth amidst the Red Sea attacks.

Congestion at Singapore’s container port, which is at its worst since the COVID-19 pandemic, is expected to persist until year-end due to ship rerouting to avoid Houthi attacks in the Red Sea, analysts said.

Some shipping lines have started using alternative ports including Klang and Tanjung Pelepas in Malaysia to cut delays, though the bottlenecks caused by the global ocean shipping disruptions have also affected other Asian and European ports.

“Our estimation is we'd see it through to the end of the year, possibly through until the Chinese New Year,” Andrew Coldrey, vice president for the Asia-Pacific region at C.H. Robinson, told Singapore Business Review on Aug. 26.

He said shipping lines have had to wait for one to two days to berth in Singapore. The port congestion has also pushed up freight rates.

“By the middle of 2024, the shipping costs increased to a level comparable to the peak during COVID-19,” Yuma Ito, partner and head of Singapore at Arthur D. Little Southeast Asia, said in an interview.

Vessels are now taking longer routes around Africa to avoid the Red Sea, where Yemen’s Houthi group has been attacking ships since November, throwing ship schedules into disarray.

As a result, ships are unloading more cargoes at once at big transshipment hubs like Singapore, where shipments are offloaded and reloaded on different vessels for the last leg of their voyage.

Global port congestion is at a two-year high, maritime data firm Linerlytica said this month. Singapore’s queue-to-berth ratio was 0.2 as of 4 September, with 45 ships at port and nine waiting at anchorage.

On a global scale, 783 ships were at port, whilst 614 remained at anchorage.

As of 5 September 2024, the global average freight rate per 40ft container was US$4,775, 54% below the previous pandemic peak of $10,377 in September 2021, but more than triple the average 2019 (pre-pandemic) rate of $1,420, according to Drewry Shipping Consultants data.

The 5 September average is almost three times the year-ago rate of US$1680.73.

Shipping lines like the Mediterranean Shipping Company (MSC) have started “omitting Singapore in favour of other regional ports,” container trading and leasing platform Container xChange said in a report.

“MSC has diverted some transshipment operations to Indian ports, whilst carriers like OOCL are discharging Singapore-bound cargo at Port Klang in Malaysia,” it said. “This shift is putting additional pressure on these alternative ports, exacerbating regional congestion and delays.”

Other transport methods

But calling at neighbouring ports with capacity may not be as easy because some of them lack connectivity, said Jayendu Krishna, director and deputy head of Maritime Advisors at Drewry Shipping Consultants.

Ito said shipping lines are taking the Cape of Good Hope and Arctic Northern Sea Route as alternative routes amidst the Red Sea attacks. Some have used the Northern Sea Corridor, according to Krishna.

The Cape of Good Hope route could add eight to 10 more days to the shipping lead time, said Goh Puay Guan, an associate professor from the Department of Operations and Analytics at NUS Business School in Singapore.

Ito said there is also the Arctic Ocean route, but it is only available during the summer season when Arctic ice begins to melt. 

Shipping and logistics companies have also been using other transportation methods where necessary, Goh said. “Companies may use air, freight, rail, or truck. It doesn’t move the same volume of [goods], but it can provide alternative routes to get cargo to the customer,” he added.

A number of companies had used multi-modal transportation to move goods during the pandemic, he pointed out.

Ito said there is also an in-land route across the Euro-Asian continent via railway. The route has experienced some volume increase after some companies started using it, Krishna said.

Goh said some shipping lines have been acquiring companies to boost their logistics capabilities.

For example, MAERSK bought Hong Kong-based LF Logistics in 2022, while Singapore’s PSA International has expanded its logistics footprint by acquiring BDP International in the US. Meanwhile, CMA CGM bought Ingram Micro's Commerce & Lifecycle Services to strengthen its third-party logistics services.

Apart from the modes of transportation, shippers should also diversify their carriers, Coldrey said. “In the past, shippers would consolidate their volume with a single carrier to try and negotiate the best possible price. The downside is, it's very hard to rely on one carrier,” he said.

“What we offer our customers is a broad basket of carriers so that we can utilise different services depending on their capacity,” he added.

Coldrey said it all boils down to “better and advanced planning,” which can be done using tracking and logistics management systems. In planning, companies must also consider having flexible inventory management.

“When you know there’s going to be times of congestion, high inventory levels can really help mitigate the impact,” he said. “Sometimes, a small increase in inventory can help offset [the impact of congestion].”

For logistics players, Coldrey said local warehousing could help buffer against delays, whilst shipping lines could optimise schedules and routes to avoid peak congestion times and spread out arrivals more evenly.

Ito said shipping companies should start using artificial intelligence (AI) and big data analytics to predict and manage port congestion. “Collaboration between shippers and liners to share services and resources during emergencies can also be crucial in minimising delays,” he added.