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The Shipping Tribune

Singapore port congestion threatens to gum up global trade


The risk of higher prices for everything from cars to smartphones for the world’s consumers just got a lot higher. Congestion at Singapore’s container port, which is at its worst since the pandemic, has started spilling over to neighbouring ports, posing a risk for global supply chains. Shipping rates have risen as much as fivefold over the past year and it is only a matter of time before some of that is passed on to shoppers. 

Singapore is the world’s largest transshipment hub: the container port connects more than 600 ports from 123 countries and has an annual capacity of 50mn 20ft equivalent units, a measure of volume. Things are getting serious when congestion from a hub of this size starts a domino effect for neighbouring ports.

That rare phenomenon is playing out this week with container ship congestion spreading to neighbouring Malaysia.

One explanation is that ships rerouting to avoid Red Sea attacks have led to bottlenecks in other Asian and European ports. Diversions have then meant more ships going through Singapore. Maersk, the world’s second-largest container carrier, for example, said it would skip two westbound sailings from China and South Korea this month owing to severe congestion. JPMorgan had estimated the Red Sea shipping crisis could add 0.7 percentage points to global core goods inflation for just the first half earlier this year. 

Now, another more unexpected problem could mean lasting disruptions to the global supply chain even when the Red Sea shipping crisis eases. The total volume of vessels, especially to and from China, has surged in recent months, and the annual peak shipping season has arrived earlier than expected. 

US President Joe Biden unveiled tariffs on a wide range of Chinese imports including chips, batteries, steel, medical products, electric cars and solar cells in May. Tariffs have also been proposed on other products such as ship-to-shore cranes. Companies have been rushing to secure inventory of these items before each of the tariffs go into effect later this year. 

Among those hit will be automakers, which unlike other manufacturers of smartphones or smaller electronics, cannot shift their shipments to airfreight.  

Singapore’s ports are not the only danger spot to watch. The biggest US ports union suspended labour talks last month and has instructed members to prepare for a possible strike starting in October, threatening to create a perfect storm for global supply chains. 

A backlog of a similar scale in Asia during the pandemic resulted in higher prices for all kinds of products. The longer the shipping congestion lasts in Singapore, the higher the risk of another inflationary jolt for the world.

Source: Financial Times 

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