Congestion at seaports is caused by more than just the increasing size of vessels, and a change in mentality is needed to solve the issue, according to speakers at the TPM Asia conference in Shenzhen.

Andy Lane, a Singapore-based partner of Container Transport International Consultancy, said that the low utilization rate of terminal cranes is part of the problem.

Looking at the number of TEUs handled by cranes at the world’s 12 largest ports, the average comes to about 187,000 TEUs per quay crane per year.

“Many people will say that’s good, because that’s what we expect them to do,” said Lane. “But do we expect them only to produce 187,000 TEUs a year?”

Working backwards from that number and dividing it by the average number of TEUs per move gives 116,000 moves. Assuming that those cranes work at a rate of 28 moves per hour, they will need to be operational for just over 4,000 hours a year to produce that number of moves.

“But there are 8,760 hours in a year,” said Lane. “So those cranes are, at best, 48% utilized.”

The fact that these assets, which cost US$10 million apiece, are only 48% utilized does not reconcile with claims of congestion, added Lane.

Meanwhile, shipping lines continue to add ever-larger vessels to their fleets. Maersk, which introduced the Emma Maersk in 2006 and now operates some of the largest ships in the world, finds the inefficiencies of terminal infrastructure frustrating.

“There is an inherent issue with the fact that the vessel upgrades that take place over time have not necessarily triggered by themselves an increase in terminal productivity,” said Robbert Jan van Trooijen, CEO of North Asia at Maersk Line. “If we look at the vessel size deployed by Maersk on the Asia-Europe trade, it’s gone from 9,000 TEUs on average just over five years ago to 14,000 TEUs. Terminal productivity in the same period has only increased by 15%. That of course is not the same ratio and requires close collaboration between shippers, terminal operators and the carriers to exploit the benefits of this additional capacity over time.”

While Lane admitted that a 100% utilization rate is never going to be possible because of maintenance, changeovers and other factors, he said that it wouldn’t be unreasonable to increase it to 60% and to make 32 moves per crane per hour, since they’re designed to make 48. The result would be a total of 269,000 TEUs per crane a year, an increase of about 80,000 TEUs per crane.

“Those 12 ports have nearly 1,300 cranes, and if the contribution margin for profit is US$10, which is extremely conservative for the terminal business, then just for those 12 ports alone, they could actually be making more than US$1 billion extra,” he said. “So if they don’t want to do it for the customers, they might want to do it just for themselves.”

Looking at Asia specifically, about 12% of the 49,000 calls at 27 major Asian ports in 2014 were made by 10,000+ TEU ships, and those called brought about 22% of the total cargo volume at those ports, according to Lane.

“Now, if one-fifth of our terminal volume is causing us to go into meltdown, I’m not believing that,” he said. “My conclusion is that big ships alone are not the problem. My word of caution is that the ratio will increase. So if you feel that it’s a problem today, it might be a good time to do something about it because it’s not going to get any easier.”

Lane went on to say that another cause contributing to the problem is the way people think.

“People talk about the big ships causing cargo surge, but what I think causes the cargo surge is the collective mentality that, apparently in East China and South China, you’re only allowed to berth ships between Friday and Sunday,” he said. “Of course, the terminals are open, but there is this mentality that, unless you offer an end-week closing, you will not fill your ship.”

On the basis that there won’t be a downsizing of ships, the industry will need to change the way it thinks about closing and the supply chain generally, according to Lane, because the industry is essentially going backwards if productivity does not increase in line with call size.

Van Trooijen agreed, saying that the way in which the industry constructs cargo flows can also impact terminal efficiency. For example, around 60% of the monthly cargo in some places gets shipped in the second half of the month because salespeople start worrying about their sales targets and more sales take place.

“They need to get that cargo out by the last day of the month, otherwise they miss their sales target,” he said. “So the end-month calls tend to be oversubscribed and the early-month calls tend to be undersubscribed. From the terminal perspective, that’s an issue.”

One possible way of alleviating the problem and striving for more even cargo flows, according to van Trooijen, could be to try to align the sales targets so that it becomes an incentive to ship in the first part of the month rather than the last.

Another involves closer collaboration using electronic means. “More e-solutions that provide a direct connection between the players that are involved could create better visibility of the supply chain and could make that supply chain more predictable for the partners involved and, as such, diminish the amount of disruption that we see in the supply chain,” said van Trooijen. “That will certainly benefit the terminals and everybody else.”

Lane said that there are large variations between different ports and terminals in Asia. For example, Bangkok Port is extremely congested, whereas Laem Chabang Port, also in Thailand, is 40% utilized, and Cai Mep Port in Vietnam is 0% utilized.

“If you keep trying to squeeze everything through an asset that doesn’t have the capability to scale up anymore, that’s like trying to push an elephant through a mouse hole,” he said. “You can keep on trying until the end of time – you will not succeed. So the solution in places like that is simply to start using the facilities that have been standing empty and waiting for the cargo to come.”

In order to start an improvement journey, Lane said he thinks the industry will need to have a little bit of a change in mindset and beliefs.

“If we believe that we are already operating at maximum efficiency, then there is no reason to think about trying to improve, because we've already convinced ourselves that we cannot,” he said. “Once we believe that there is room to improve, we need to start the conscious process of systematically improving through business performance management and closer collaboration among ports, terminals, lines and shippers.”

By Jeffrey Lee

Asia Cargo News | Hong Kong