Analysis: Overloading of Singapore port shows global impact of Red Sea attacks

By Lisa Barrington and Jeslyn Lerh

SEOUL/SINGAPORE (Reuters) – Congestion at Singapore’s container port is at its worst since the COVID-19 pandemic, a sign of how the lengthy diversion of ships to avoid attacks in the Red Sea has affected global maritime shipping – and bottlenecks are also occurring at other Asian and European ports.

Retailers, manufacturers and other industries that rely on giant container ships are once again grappling with rising freight rates, port congestion and a shortage of empty containers, while many consumer-facing companies look to build up inventory for the year-end peak season.

Port congestion worldwide has reached an 18-month high, with 60 percent of ships anchored in Asia, maritime data firm Linerlytica said this month. In mid-June, ships with a total capacity of over 2.4 million 20-foot container equivalent units (TEU) were anchored.

But unlike during the pandemic, it is not a buying spree by homebound consumers that is flooding the ports.

Rather, there are disruptions in ships’ schedules, with departure times being missed and fewer ports being called at as ships have to take longer routes around Africa to avoid the Red Sea, where the Yemeni Houthi group has been attacking shipping since November.

For this reason, at large transshipment points such as Singapore, larger quantities are unloaded at once and transferred to other ships for the last leg of the journey. For scheduling reasons, the ships forego subsequent trips.

“(The freight forwarders) are trying to control the situation by placing the boxes at transshipment points,” said Jayendu Krishna, deputy head of Singapore-based consulting firm Drewry Maritime Advisors.

“The liners have piled up boxes in Singapore and other hubs.”

Average cargo discharge volumes in Singapore increased by 22 percent between January and May, which had a significant impact on the port’s productivity, Drewry said.

Heavy traffic jams

Singapore, the second largest container port in the world, has experienced particularly heavy traffic jams in recent weeks.

The average waiting time for a container ship to dock is two to three days, Singapore’s Maritime and Port Authority (MPA) said in late May. Container trackers Linerlytica and PortCast said delays could be up to a week. Docking should normally take less than a day.

There are also traffic jams in neighboring ports as some ships skip Singapore.

The burden has shifted to the Malaysian ports of Klang and Tanjung Pelepas, said Linerlytica, while waiting times have also increased in Chinese ports. The longest delays have been recorded in Shanghai and Qingdao.

Drewry expects congestion at major transshipment ports to remain high, but expects some easing as carriers increase capacity and restore schedules.

The story goes on

The Singapore MPA has reopened older berths and yards at Keppel Terminal and will open additional berths at Tuas Port to avoid prolonged waiting times.

Maersk, the world’s second-largest container shipper, announced this month that it would cancel two westbound sailings from China and South Korea in early July due to severe congestion at ports in Asia and the Mediterranean.

HIGH SEASON

The annual peak shipping season has also arrived earlier than expected, exacerbating port congestion, shippers and research firms said.

The reasons for this appear to be the replenishment of inventories, especially in the USA, and the fact that customers are shipping their goods earlier in anticipation of stronger demand, says Niki Frank, CEO of DHL Global Forwarding Asia Pacific.

Container prices, meanwhile, have soared, raising the risk for buyers of another wave of price hikes, similar to the post-pandemic inflation surge that central banks are still trying to tame.

Rates had stabilized until April, but in May “there was a significant increase in sea freight exports of Chinese e-commerce, electric vehicles and renewable energy goods,” said Asia-focused freight forwarder Dimerco.

“The peak season, which traditionally begins in June, was brought forward by a full month, resulting in a rapid increase in sea freight rates.”

Container import volumes at the top 10 U.S. seaports rose 12% in May, driven by the second-highest monthly import volume since January 2023, according to data provider Descartes.

“(U.S.) consumers continue to spend more than last year and retailers are stocking up to meet demand,” said Jonathan Gold, vice president of the National Retail Federation.

Sea freight imports from Asia to Europe are also showing signs of a replenishment season developing into the peak season, which will drive rates to highs in 2024, said Judah Levine of freight platform Freightos.

Container freight prices from Asia to the US and Europe have tripled since the beginning of 2024.

According to freight platform Xeneta, rates from Asia and Singapore to the US East Coast are at their highest since September 2022, while rates to the US West Coast are at their highest since August 2022.

Some industry participants believe that the bottlenecks at Chinese ports are partly due to heavy purchases of Chinese goods such as steel and medical products, which will face drastic tariff increases starting August 1.

But the newly imposed US tariffs would only affect about four percent of Chinese imports into the US, said Jared Bernstein, chairman of the Council of Economic Advisers.

Gene Seroka, CEO of the Port of Los Angeles, the largest U.S. gateway for Chinese sea imports, also expects limited impacts.

“We may see some of that cargo arrive, but it won’t be a flood,” he said.

Concerns about possible strikes at U.S. ports could also bring the peak season forward this year, and DHL said strikes at German ports would exacerbate traffic congestion.

All of these disruptions would likely mean higher prices for consumers, experts warn.

“These are enormous financial losses that the freight forwarders have to cope with,” said Peter Sand, chief analyst at Xeneta.

(Reporting by Jeslyn Lerh in Singapore, Lisa Baertlein in Los Angeles and Lisa Barrington in Seoul; Editing by Miyoung Kim and Kim Coghill)