Ports Face The Biggest Crisis In 65 Years

by John Konrad (gCaptain) Ports have taken center stage during COVID-19. While countless airports, roads, and trains ground to a halt during the peak of the pandemic last year, authorities continued to wave ships into ports. This makes clear the importance of shipping but also the danger of port disruptions in the future and today the Financial Times (FT) is reporting the biggest disruption to ports since the start of container shipping 65 years ago.

“The Covid-19 pandemic has highlighted that ports are in desperate need of investment,” John Manners-Bell, chief executive at consultancy Transport Intelligence, told FT. “The entire port infrastructure system has been overwhelmed for the past year.”

According to Kuehne+Nagel 353 container ships are currently anchored outside ports around the world, more than doubling the number from earlier this year. The busiest ports, such as Los Angeles / Long Beach, are experiencing delays of 12 days or more.

During a time when next-day delivery has increased because of a pandemic-driven surge in online shopping, the logjam has caused shortages of stock and delayed deliveries, raising prices, frustrating consumers, and alarming regulators.

Adding to the problem is an aging and overburdened port system. “There were problems before the rush of cargo,” said Soren Toft, chief executive of the world’s second-largest container shipping group MSC. “Port complexes were becoming old, there were capacity restrictions and restrictions on the ability to serve the ever-growing size of ships.”

The most obvious solution to the problem is investing in port infrastructure, short sea shipping, and short sea distribution but only $17 billion of President Biden’s $1.22 trillion infrastructure bill is allocated for ports and waterways.

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“The President’s plan to invest $17 billion in the nation’s ports and waterways is essential to alleviate backlogs and improve the nation’s vital supply chain,” said Dr. Sal Mercogliano, Associate Professor at Campbell University and adjunct professor of maritime policy at the U.S. Merchant Marine Academy. “Yet, such an investment is only a start and needs to be tied to a large and comprehensive national maritime strategy to make the nation more competitive in international trade and against competing domestic modes of transportation, such as truck, rail, and pipelines.”

Even if new money is found to expand ports, dredging ports and ordering equipment is not an easy fix. The time it takes to install a crane ranges from 18 months to more than a year, which makes it challenging for ports to adjust quickly to demand changes.

The only short-term solution is to think outside the box. Literally. In New York City thousands of large trucks bring cargo from New Jersey Terminals to places like Hunts Point food market in The Bronx but hundreds of thousands of small and Less Than Truckload tractor-trailers and vans deliver food, packages, and pallets of goods from warehouses and markets to the stores and consumers direct. Distribution is the problem.

“We need to think outside the box” says Bob Kunkle, founder of the short sea distribution company Harbor Harvest. “We don’t need to get shipping containers from ships to warehouses, we need to get palletized cargo from ships all the way to stores.”

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If we can deliver smaller cargos, aboard smaller ships, to smaller ports, we may be able to alleviate congestion in both ports and cities. The problem is that, apart from a pilot program in London, very little evidence exists that lawmakers are even aware of the problem.

“It is illegal to drive a shipping container into most cities,” said Antoon Van Coille, CEO of the short sea distribution company Zulu Associates. “Disruptive innovations are needed to change radically the way goods are moved from ports into cities. To do that we must move from mega-ships to mini-ships.”

Companies like Zulu are focused on the biggest, wealthiest, and most congested ports like New York and Long Beach but the problem is truly global in nature. Turloch Mooney, associate director of maritime and trade at IHS Markit, told FT that many poorer ports are “sub-par” and failed to adapt to the new, larger ships, particularly in emerging markets such as Bangladesh and the Philippines, where there was chronic congestion even prior to the pandemic. 

Getting local support for innovations like short sea distribution is difficult enough but global change requires leadership from the International Maritime Organization, the United States Maritime Administration (MARAD), and the EU. Unfortunately, that leadership does not currently exist.

According to Nishan Degnarain at Forbes, The IMO is an “embattled UN agency that gets headlines, not for innovation, but for “facilitating agreements that broke the Paris Agreement on Climate Change with emissions from shipping that actually increased rather than decreased by 2030.”

Searching the IMO website for the term “Short Sea Distribution” yields zero results.

The situation is not much better in the United States or much of the EU. gCaptain was able to find short sea distribution programs in a handful of European countries (e.g. UK, Belgium, The Netherlands) but we could find no mention of the term in European Union documents, and the United States cares so little for maritime innovation that it has failed to appoint a US Maritime Administrator.

“The MARAD position has historically been overlooked but may prove to be a critical appointment for the Biden-Harris team,” said Degnarain in November 2020. “Transforming global shipping is critical for the planet to meet climate objectives, and strong maritime leadership from the U.S. is required.” Unfortunately, nine months later, this critical appointment remains unfilled.

But perhaps the biggest question is how ports will respond to potential changes in consumer demand after the pandemic if there is no government leadership and media interest in logistics wanes.

“The demand for next-day delivery has changed the way in which shippers select ports,” said Marc Levinson, author of The Box. “And that could change again if, after the pandemic, it goes out of favour.”

Don’t expect port and road congestion to go away anytime soon. We can blame shipping companies like Maersk and MSC for escalating costs but with less than $17 billion of $1.2 trillion infrastructure bill devoted to ports, with no Maritime Administrator, with our top maritime CEO’s not pushing for change, with the IMO not once discussing Short Sea Distribution… our problems run deeper than any single company. Our port problem runs deeper than the Marianas Trench.