It seems the Port of Manila is not the only major port in the world suffering from the problem of “port congestion,” and the causes of it may be beyond the ability of the responsible authorities to solve.
Since the beginning of the year, dozens of ports around the world have experienced periods of congestion, most notably the Port of New York and New Jersey, the biggest port on the US East Coast, the massive Los Angeles-Long Beach port complex, which is America’s biggest West Coast port, the major European port of Rotterdam in the Netherlands, and the port of Lagos, Nigeria.
Here in the Philippines, the “truck ban” imposed by the city government, and which was extended by similar ordinances in the cities of Caloocan and Navotas, was blamed by everyone competent to form an opinion about it for the congestion in the two main container terminals at the Port of Manila. Yet, even though the restrictions on truck traffic in and out of the port were lifted more than a month ago, the backlog has not significantly eased.
Indeed, yard utilization rates — a key measure of congestion—at the Manila South Harbor and the Manila International Container Terminal have come down to more manageable levels, from extremes of 100-105 percent in May and June to 80-85 percent now, according to various reports. Part of that progress, however, has been achieved by simply shifting the congestion problem off the docks and into the bay. The number of ships waiting in the anchorage at any given time for port berths to be able to unload their cargoes has not gone down from the 8-10 seen during the midsummer “peak” of the congestion, and on some days has even increased; at one point about three weeks ago, there were as many as 30 ships languishing in the roadstead.
That sounds eerily similar to this report from last Friday’s Los Angeles Times: “In the worst shipping crisis in a decade, mammoth vessels loaded with products destined for the nation’s stores are sitting idle just off the coast, waiting for cargo languishing on the docks to clear.”
The ports of Los Angeles and Long Beach, which are respectively the largest and second-largest ports in the US, handle about 40 percent of America’s imports; in that sense, they are similar to the Port of Manila in terms of their disproportionate impact on the national economy. Unlike the Port of Manila, however, the massive port complex in Southern California is connected to the rest of the country by a magnificent infrastructure of roads and railways. The terminal facilities are vast, and have more than enough modern equipment and logistical system support to move an enormous amount of cargo between ships and shore at any time. In short, there is no immediately obvious reason why this giant, state-of-the-art, well-connected port complex should be suffering from exactly the same problem as the comparatively rustic Port of Manila.
The root cause of the problem, as it turns out, is not in the ports themselves, but comes from the shipping industry. Intense competition has put the ocean shipping sector under severe cost pressures; not only are ocean shippers competing with each other, they are competing with the air freight business as well, as more efficient aircraft have steadily lowered the costs of that alternative for customers. To maintain profitability, the shipping business has sought to reduce costs, which it does in two ways: First, by cutting extra handling services, and second, by increasing efficiency through the use of progressively larger vessels. Both of these decisions have serious negative impact on ports, and as a consequence, wider markets.
Up until very recently, shipping companies routinely provided chassis – the truck trailers used to move containers from the docks to customers or to railheads – as part of their services. They are now rapidly doing away with this, selling the equipment off to third-party leasing companies; in Southern California, most of this has taken within the last year and has caught the ports and customers unprepared, according to the LA Times report. The issue is now affecting all US ports to varying degrees, as well as ports in Europe and some parts of Asia.
Prior to the change, shippers could coordinate the chassis with ship arrivals and departures, and have enough equipment available when and where it was needed; the new system has led to inefficiencies, resulting in cargo building up and getting simply too large to be moved fast enough to prevent the ports from getting clogged. In countries like the US and the UK, the problem is being aggravated by the lack of skilled drivers and truckers, and the fact that trucking companies are increasingly avoiding the port cargo business because of it.
And all of that is being further aggravated by the increasing capacity of the ships calling at world ports. Ships that are considered large now – those with carrying capacity of 8,000 to 10,000 TEUs (20-foot equivalent container units) – are rapidly being replaced by even larger ones with capacities of 14,000 to 18,000 TEUs, and it’s not hard to understand why; the fuel savings per TEU for a ship with a 14,000 TEU capacity versus one with a 10,000 TEU capacity is roughly $64. But these giant ships put an enormous strain on port resources. According to a report in the Journal of Commerce at the beginning of the month, the LA-Long Beach port complex had a one percent increase year-on-year in incoming cargo for the month of August, which required a 20 percent increase in man-hours to handle it all, an imbalance attributed to the fact that ships in the 13,000-14,000 TEU capacity class typically account for a minimum of 5,000 and sometimes 8,000 to 10,000 container moves when in port.
Given that ports are simply links in supplies chains, congestion in one major port – whatever the reason – leads to increasing problems for other ports; an official with South Harbor operator Asian Terminals Inc. touched on this during our investigation for The Manila Times’ special report on Philippine ports last month, when he described growing congestion problems arising from accumulating Manila-bound cargo in ports such as Hong Kong, Shenzhen, Busan, and Kaohsiung.
All of this simply means that the hopes of government officials, local economic analysts, and business groups that congestion at the Port of Manila is somehow a temporary problem with a relatively easy solution are completely in vain. It is a problem that is going to persist and steadily get worse unless and until the government and concerned stakeholders come together to embark on a massive effort to reorganize and upgrade this critical part of the nation’s supply chain. I’ll leave it to the reader to decide how optimistic we should be about the prospects for that.
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Tomorrow (Wednesday) I will be participating in the first Manila Times Business Forum, where we will be discussing the opportunities and strategies for productive business relations between the Philippines and China. Through no small effort of the Manila Times forum organizers, we’ve assembled an impressive roster of speakers, including former President Fidel V. Ramos, former Foreign Secretary Roberto Romulo, NEDA Director-General Arsenio Balisacan, and experts on business and public policy from Stratfor, PricewaterhouseCoopers, and Dezan Shira and Associates. The event will be held at the Dusit Thani in Makati; if you haven’t signed up yet, there is still time to do so—see the details in the ad which is just a page turn or a click away, depending on how you’re reading this right now.