There is no mistaking, on entering the port of Algeciras, at the southernmost tip of Spain, how busy the facility is. The cranes that tower above the port’s two container terminals are nearly all at work, shuttling containers on and off ships.
The piles of boxes in the terminals’ yards are mainly stacked the maximum five high. Alonso Luque, chief executive of TTI Algeciras, operator of one terminal, says that this year he has turned away far more requests to handle extra cargo than he has been able to accommodate. “You can see that the capacity is quite limited,” he says, gesturing at the stacked containers.
On the other side of the Gibraltar Strait in Morocco, executives at TC3, a container terminal in the Tanger Med port development, face similar challenges.
Both ports are feeling the strain of resurgent disruption, congestion and other problems for global shipping following a sudden, forced rejigging of the world’s maritime trade networks.
The problems follow many shipping lines’ decisions, at the end of 2023, to reroute voyages away from the waters off Yemen after facing attacks from Iran-backed Houthi militias. Container ship arrivals in the Gulf of Aden, at the entrance to the Red Sea, are down 90 per cent on the same period last year according to data from Clarksons, the shipping services provider.
Diverting vessels from Asia and bound for Europe around the Cape of Good Hope adds an additional nine to 14 days to voyage times. The diversions are also creating hold-ups in places like Algeciras and Tangier that are suddenly in demand as places to move cargo between ships.
The disruption adds to a growing list of challenges facing the world shipping industry. Pirate attacks off Somalia, on Africa’s eastern coast, have increased and there are concerns that Iranian forces might target more vessels in the Strait of Hormuz, the entrance to the Gulf, after Revolutionary Guards Corps seized the MSC Aries in April.
In the Americas, a drought has forced the Panama Canal Authority to reduce the number of daily transits between the Atlantic and Pacific oceans and to set limits on vessels’ draft — the maximum depth of the hull below the waterline. In Europe, many ports that handle vehicle imports are badly congested amid a glut of cars from China.
Jan Rindbo, chief executive of Norden, one of the world’s biggest operators of dry bulk carriers and tankers, says the simultaneous problems are “real black swan events” for the industry. “I’ve never in my 30 years in shipping seen anything like this,” he says.
Rolf Habben Jansen, chief executive of Hapag-Lloyd, the world’s fifth-largest container shipping line by fleet size, expects the Suez-related diversions to continue for some time. “We send all our ships around Africa and for now it’s very difficult to see [how] that’s going to change,” he said in April.
Daniel Richards, a director at London-based maritime consultancy MSI, says the disruption is nowhere near the levels experienced during the Covid-19 pandemic, when an unexpected surge in consumer demand and reduced staffing on ships and at ports induced near-paralysis in parts of the world’s maritime transport system.
Problems were initially concentrated in specific regions or product groups, such as vehicles and fresh or perishable goods.
However, Denmark’s Maersk, the world’s second-biggest container shipping line, recently warned of wider port congestion across its Asia-Europe network which had led to an “accumulation of delays”.
Richards says conditions could grow still worse as the industry moves into the pre-Christmas “peak season” in the northern hemisphere late summer and autumn.
“There has been a greater delay impact from Red Sea disruption than people had anticipated,” Richards says.
“Things are definitely becoming less functional and more dysfunctional, even before we’re into peak season.”
Under the bright spring sunshine on the Moroccan side of the Gibraltar Strait, it becomes clear why circumstances are so difficult at the western end of the Mediterranean.
Ships taking the Cape route from Asia to northern Europe no longer pass through the eastern Mediterranean and instead need to stop at the western end to “trans-ship” containers to and from countries such as Italy, Greece and Turkey.
The diversions, and the need for trans-shipment, are “introducing more delays, more dwell time,” says Nabil Boumezzough, president of the management board of Tanger Alliance, the joint venture that runs the terminal. “More dwell time equals more containers staying a long time in the ports.”
Vessel schedules have become less reliable and ships frequently arrive with little warning, he adds. There is often no immediate sailing available to carry their cargoes further into the Mediterranean.
During the first quarter, the terminal’s yard was at times running at 99 per cent of its capacity, a level that inevitably slows down operations. “It’s challenging your efficiency and challenging your productivity and challenging how you’re managing your port,” says Boumezzough.
Luque says that shipping lines are responding by sending cargoes to Valencia and Barcelona — the latter’s first-quarter trans-shipment volumes were 48 per cent higher than in the same period of 2023 — Casablanca and Malta. Others are taking containers to north European ports and organising services back to the Mediterranean from there.
All the options add substantially to the distances vessels have to sail. “They’re going to use more days and more fuel consumption, more cost,” Luque says.
Nichola Silveira, chief executive of terminal operator PSA Sines, says that Mediterranean Shipping Company, the world’s biggest container line and the sole customer of her facility in Portugal, is also bringing some extra trans-shipment volumes because of Suez Canal reroutings.
She says container lines “are looking at their network design” because of the canal disruption and other considerations, such as the impact of Europe’s carbon emissions trading scheme that has included emissions from shipping since January.
Efforts are under way worldwide to find ways around the worsening bottlenecks. Tiemen Meester, chief operations officer for DP World, one of the world’s biggest container terminal operators by volume, says some shippers are moving goods through Jebel Ali in Dubai because it is a lower-risk option than heading to Jeddah on the Red Sea. Cargoes then go from Jebel Ali to Saudi Arabia by truck, incurring additional costs.
The Panama Canal Railway has provided a partial workaround for capacity constraints on the canal itself. Some shipping lines have circumvented the draft restrictions by dropping off containers at one end of the canal, which leaves the vessel sitting higher in the water. The offloaded boxes are then transported to the other end by train and picked after the ship has passed through the canal.
Figures from Xeneta, a container shipping information service, show how the various challenges on the Panama Canal route have pushed up prices. Spot rates were $5,584 per 40ft container between Asia and the US east coast on May 16, more than twice the $2,434 cost a year before, according to its data.
On the route between Asia and north Europe, the rate for a 40ft container stood at $4,343, three times the $1,456 a year before.
Richards says that delays could prove far more economically damaging for many customers than the increases in freight rates. “These things are much harder to quantify, but that’s going to be the much more relevant channel for economic disruption.”
Peter Sand, chief analyst at Xeneta, points out that shipping lines would normally have responded to the Panama problems by rerouting vessels from Asia to the US east coast through the Suez Canal. “But this isn’t an option either for the majority of shippers, due to the conflict in the Red Sea,” he says.
Lasse Kristoffersen, chief executive of Wallenius Wilhelmsen, the world’s biggest operator of car-carrying ships, says that two crises are also interacting in the Strait of Hormuz. Security concerns about the Iranian threat to vessels using the strait have been heightened because it is now handling additional traffic such as that diverted from Red Sea ports by the Houthi threat.
“We’re depending on free trade and open sea routes and whatever happens off the coast of Yemen and in the Strait of Hormuz is a big challenge for our ability to deliver, no doubt,” Kristoffersen says.
The challenges in the strait highlight how any worsening of tensions in the Middle East could create further difficulties for shipping. The Houthis are part of Iran’s “Axis of Resistance” in the region and earlier this month they demonstrated an ability to hit ships further out in the Indian Ocean with a drone attack on the MSC Orion.
“Shipping in general is very vulnerable to these geopolitical issues,” Kristoffersen says.
Car-carriers are facing an additional problem: overproduction of electric vehicles in China has led to a saturated domestic market, resulting in a flood of exports to Europe. With only limited distribution networks in their target markets, Chinese-made cars are piling up at ports.
UECC, another vehicle transporter, says one of its vessels had to wait more than five days during March to berth at the Italian port of Livorno because the facility was so congested.
“We have had many frustrating experiences with our vessels being delayed in Livorno and Piraeus in Greece, due to port and terminal congestion,” the company says.
In container shipping, Michael Aldwell, executive vice-president of sea logistics at Switzerland’s Kuehne + Nagel, a major logistics group, says the biggest problems have hit companies trying to move food, flowers and other perishable products.
“What we really see at the moment is the disruption that’s destroying markets, damaging markets, is around perishable, time-sensitive goods,” he says.
In northern European ports, the situation is calmer. As the 294-metre-long Toronto Express docks at Southampton Container Terminals, director of operations John Painter acknowledges that ships have been turning up outside their scheduled times since the start of the year.
But he adds the sector learnt important lessons from the severe congestion that many terminals suffered during the Covid-19 pandemic. It recently negotiated a new, more flexible contract with its staff that allows it to redeploy workers between Southampton and DP World’s other big UK terminal, at London Gateway on the Thames, to ensure it can handle surges in traffic efficiently.
“We’ve always had an extremely flexible workforce,” Painter says. “The benefit now is we can move labour if necessary between those two ports if we did experience congestion.”
Meester, at SCT’s parent company, says he doesn’t see “any specific problems arising in the DP World network.” The company has one of the world’s largest networks of container terminals, operating facilities on six continents, including several facilities in India and China.
He adds that although more sailings have been coming to the company’s facility at Jebel Ali, the port has a significant “absorption capacity”.
MSI’s Richards says some of the gravest potential problems — such as food shortages in supermarkets or the filling up of all available ships — have so far been avoided. There is “much better slack” in terms of ship availability than there was before the start of the Covid-19 crisis, he says.
While there are now some signs of shortages of vessels and containers, shipping lines were initially able to charter unused container ships to maintain service levels and accommodate the increased journey times.
There have definitely been “lessons learnt” from the pandemic, Richards adds. Many customers have started to hold larger stocks of vital components or finished goods for sale, after many just-in-time supply chains ran out of goods during 2020 and 2021.
“I think everyone along each point in the supply chain is more aware of the risks than they were five years ago,” he says.
Yet, back in the Gibraltar Strait, there are unmistakable signs of steadily gathering problems. In Algeciras, Luque says that shipping lines have asked him to handle an extra 100,000 TEUs (20-foot equivalent units, a standard measure in the industry) of containers so far this year. But his terminal has only had the capacity to move 40,000 TEUs of this extra traffic, on top of scheduled calls by its normal customers.
“We would like space to serve the market,” Luque says. “But that isn’t the case, unfortunately.”
In Tanger Med, Carlos Lazo, vice-president of the management board at TC3, says the terminal cannot continue to operate at its current intensity for a long time. “That’s not sustainable,” he says. Outside both ports, some ships sit at anchor apparently waiting for a berth. Their presence is a sign of strain in a system where ports typically seek to have vessels enter port immediately on arrival.
Kuehne + Nagel’s Aldwell warns that this year’s peak shipping season could prove very difficult if it arrives without a resolution to the Red Sea issues. That is particularly the case, he says, if European consumer demand revives as inflation falls back, interest rates are cut and cost of living pressures ease.
“If we’ve got these long transit times and we see the consumer come out and start buying again, I think we have opportunities for some challenges there,” Aldwell says. “That’s for sure.”
Cartography by Cleve Jones
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