Singapore Port, the world’s largest transshipment hub and second-largest container port, connects over 600 ports from 123 countries and boasts an annual capacity of 50 million 20-foot equivalent units (TEUs). When such a pivotal hub faces disruptions, global supply chains inevitably suffer, leading to potential price increases across various sectors—a significant inflationary concern for the world.
Multiple factors are contributing to these disruptions, each influencing the others like a chain reaction. One widely recognized cause of congestion is the rerouting of ships to avoid Red Sea attacks. As a result of these diversions, more ships are passing through Singapore and neighbouring ports. The Business Times reported that approximately 90 percent of container ships arriving in Singapore are now off-schedule due to these diversions, marking an increase from the 2023 average of 77 percent. Consequently, both upstream and downstream ports are experiencing congestion, making it difficult for ships to reroute to alternative nearby ports. The Financial Times recently noted that container ship congestion has begun spreading to neighbouring countries like Malaysia. In addition to these, there has been a surge in the total volume of vessels, especially those traveling to and from China, in recent months. This influx has coincided with an earlier-than-expected annual peak shipping season, further exacerbating the situation. Compounding these issues, shipping lines have been skipping ports to regain schedule adherence, thereby worsening the problem.
JPMorgan’s recent report highlighted that the Red Sea shipping crisis likely contributed 0.7 percentage points to global core goods inflation in the first half of this year. They warned that a new crisis could lead to prolonged disruptions in the global supply chain even after the Red Sea attacks diminish.
Despite ongoing challenges, the operator of Singapore Port announced on 10 July 2024, that congestion in Singapore has eased, with average wait times reduced from 7 days to 2 days or less due to increased handling capacity. However, it is important to note that wait times remain dynamic and can vary weekly based on factors such as vessel arrival patterns and the volume of containers requiring handling.
In conclusion, the disruptions caused by factors such as Red Sea diversions and increased shipping volumes have not only strained port capacities but also posed significant inflationary risks on a global scale. While recent efforts have alleviated congestion at Singapore Port temporarily, the fluid nature of maritime logistics demands continued vigilance and adaptive strategies from stakeholders worldwide.
Ms. Idil Erbil
Solicitor and Claims Consultant
