Transhipment ports challenged by changes in call patterns amid the Red Sea crisis

Key transhipment ports, such as Singapore, have witnessed a sharp rise in congestion due to the impact of Red Sea carrier service diversions. These diversions have led to fewer vessel calls but larger average exchanges, adding to yard congestion.

Port productivity has also taken a hit in recent months, and the time spent by ships waiting before berthing at high-volume ports tracked by Drewry increased 43% between 3Q23 and 2Q24 – to over 400,000 hours.

Singapore is a microcosm of transhipment ports around the world, where changes to carrier service patterns in response to the Red Sea crisis have wrought havoc on container terminal operations. It is experiencing a density of shipping containers in its terminals close to the records of the pandemic period.

In the five months to May, throughput at the port grew 8% year over year, representing a strong start to the year but not enough to challenge existing handling capacity.

However, the rerouting of container vessel services away from the Red Sea in response to the Houthi attacks on shipping resulted in a 22% increase in average parcel sizes between January and May, according to Drewry's Ports and Terminals Insight, with a significant knock-on impact on port productivity.

Drewry estimates that the average time taken to handle 1,000 teu rose 10% over this period to 0.32 days. This means that the average time to complete the recently enlarged exchanges for a typical ULCV (>18kteu) leapt 41%, from 1.1 days in January to 1.7 days in May.

The port congestion we are seeing today differs from that of the pandemic period. Back then, systemic supply chain disruption primarily impacted gateway ports due to the combined effect of unexpectedly high cargo demand and inland transport congestion.

However, this crisis is hitting transhipment hubs as carriers have made significant changes to individual exchanges handled at these hubs.

Meanwhile, aligning mainline-mainline vessel transfers has proved difficult due to the high number of blank sailings, while aligning mainline-feeder services has been affected by congested yards, off-window arrivals, and prioritising mainline vessels over feeder vessels.

While congestion at major transhipment ports is expected to remain high, carriers are taking proactive steps to alleviate the situation. They are adding more capacity and working towards restoring some of their disrupted schedules, which is anticipated to bring about some easing in the near future.

Finally, carriers add more loops and cancel fewer sailings.

Are carrier services getting more predictable? In a volatile, under-supplied market, it is a nice feeling when you perceive that things start to look better.

Based on Drewry data, we are reaching this stage: carriers are adding new services or reinstating old ones, significantly expanding the supply for the peak season. More competition is increasing the range of available shipping options. Meanwhile, established carriers are working to restore some of their disrupted schedules.

Key numbers: Ocean carriers will add ten transpacific loops and 4 Asia-North Europe services between May and July.

Carrier competition, which shrank after the end of the post-pandemic boom, a period of rapid growth in the shipping industry following the easing of COVID-19 restrictions, is set to increase again: Ellerman will re-enter the Asia-Europe route and SeaLead and BAL Container Line on the transpacific route.

Drewry also expects that the delivery of new ships to the market will continue to fill gaps in carriers' disrupted schedules, meaning the number of sailings "cancelled" by carriers is also declining. Analysis from the Drewry Container Capacity Insight concludes that the number of cancelled sailings on the transpacific and Asia-North Europe/Mediterranean routes will decline from 62 in May to about 51 in June and to less than 41 (forecast) in July.

Our view

In Drewry's view, it is too early to say that carrier services are highly predictable. Port congestion is still chronic in many ports in Asia and the Mediterranean. The closure of the Suez Canal continues to delay ships and cargo. Plus, there is the risk of port strikes on the US East and Gulf coasts, making planning still relatively uncertain and open to new disruptions. KC Group Shipping will update you on any further developments.