Debate: International ports’ congestions and increased transport costs affecting the EU
Date: THURSDAY, 25 NOVEMBER 2021
Speaker: Helena Dalli
Language: EN

We are indeed dealing with extraordinary and unexpected challenges in freight logistics as a result of the disruption caused by the COVID-19 pandemic. These are topics of utmost importance to our industries and economy, and ultimately to each of us as citizens and consumers. With the COVID-19 pandemic, we have undoubtedly been through the most severe crisis in decades and it is not over yet as we all know.  Transport and logistics have been one of the most affected sectors. The sector has experienced exceptional pressures since spring 2020. Yet transport and logistics operators continued to operate and deliver essential goods during the pandemic. This was possible due to the considerable personal efforts and sacrifices of transport workers, including in the maritime transport sector.  There are multiple causes for the current disruption in the market. Container shipping demand picked up strongly from July 2020 as factories reopened and consumers shifted some of their household budgets from services to goods. Companies restocking depleted inventories further contributed to the sudden swing in demand. Some companies sought to increase their inventory in anticipation of future disruption.  Moreover, as economies did not reopen at the same time across the world, this created more container shipping demand in other places, causing substantial imbalances. This was further exacerbated by port congestion due to lower port productivity as a result of strict Covid protocols – covered port closures or due to weather impact.  In addition, the dramatic rise in consumer demand for goods has translated into a surge in global container shipping demand. Since July 2020 this has caused record high container shipping spot rates, on average around four to five times the normal levels on the main east-west trade. Spot freight rates have continued rising in the third quarter of 2021, reaching new historical highs. And whilst recent average arrival delays have stabilised, schedule reliability remains poor.  Importantly, a substantial amount of container ship capacity is currently tied up at anchor waiting to berth. Because port congestion increases journey times, this requires more container ship capacity. Shipping companies are increasingly deploying more capacity into key trades, in particular on the Asia to North America West Coast route.  However, the deployment of more capacity outside schedule creates a surge of cargo at the destination, with the potential of making the congestion even worse. The problem has resulted in bottlenecks and terminals and on land which affect vessels utilisation rate and effectively removes capacity from the market, reducing the ability to cater for demand.  We have recently seen a new escalation of port congestion in some critical ports outside the EU, such as Los Angeles, Long Beach, where more than 80 container vessels are waiting outside the harbours. The Commission is in regular contact with relevant stakeholders to identify any scope for action that can help towards a return to normal operations.  We are monitoring carefully market developments, facilitating dialogue between all actors of the supply chain and liaising with competition and transport authorities, both within and outside the EU. Currently it does not seem that regulation and market intervention could profitably substitute market mechanisms in sorting out congestion problems in logistic chains and imbalances between demand and supply.  The Commission is also in contact with regulators and competition authorities in China and the USA. Following our exchanges, we agreed that no anti-competitive behaviour from shipping alliances aimed at increasing freight rates has been identified so far. Nevertheless, we should focus on understanding the causes of the current difficulties and on learning the lessons of this pandemic.  We need to enhance the resilience of our supply chains and be better prepared to respond to potential future crises. In markets that are heavily intertwined, common shared actions would appear to be the most appropriate response, fighting congestion on the seaside and land side. For instance, building buffer and spare capacity, improving port call efficiency and digitalisation would in particular appear relevant.  Digitalisation and new business models in support of collaborative logistics could be important enablers in this process. One of the key elements for a resilient transport system is the availability and smart use of information. This could lead to real time decisions in the shipping and container market.  Data sharing will enhance process planning, enable failure detection and mitigation and facilitate interaction among all actors in the supply chain. Being able to track the availability and positioning of empty containers could lead to quicker reactions by all market operators in case of congestion or delay, such as container rerouting or changes in ships loading plans.  I strongly believe that we need a systemic approach accounting for the user’s perspective to achieve an integrated, multimodal smart and green transport system. Transport modes, infrastructure and assets need to be managed in a more efficient and integrated way to better exploit idle capacities. I thank you and look forward to your comments.