(Reuters) – Global supply chain problems are set to worsen, a new report released on Tuesday said China’s covid-19 deadlines, Russia’s invasion of Ukraine and other strains are causing even longer delays in ports and driving up costs.
The study by analysts at the Royal Bank of Canada found that one-fifth of the global container fleet was currently stuck in congestion in various major ports.
In China, there are now 344 vessels waiting for a quay in the port of Shanghai, an increase of 34% over the past month, while shipping anything from a warehouse in China to one in the US currently takes 74 days longer than usual.
In Europe, too, ships from China arrive an average of four days late, causing a number of side effects, including a shortage of empty containers to take European-made goods to the east coast of the United States.
“Global port congestion is deteriorating and becoming more widespread,”; RBC chief digital intelligence chief Michael Tran and colleague Jack Evans said in the report, acknowledging that it was difficult to say when things would improve.
Ships and containers must both be available at the right time and place to prevent canceled bookings. Any discrepancies lead to ships running below full capacity, which is why more are required to move the same amount of freight.
RBC said that the abundance of problems had a “domino-like negative compositional effect in different markets.”
Russia’s invasion of Ukraine at the end of February and the sinking of several ships in the Black Sea meant that insurance companies raised premiums to between 1% and 5% of the value of the ship compared to pre-war levels of 0.25%.
The prices of marine fuel in Singapore, the world’s largest refueling port, have meanwhile increased by 66% over the past year.
“Many market participants thought that the supply chains would be loose by now, but this scenario has not been realized,” the report states.
Although ship delays have improved by a fraction in recent months, the average global delay of a ship’s arrival was still 7.26 days in March, a figure that rarely peaks 4.5 days during normal times, the RBC noted.
On the west coast of the United States, the ports of Los Angeles and Long Beach continue to struggle to keep up.
A queue of 19 ships in Los Angeles and inefficiency at the port level has seen the turnaround time jump to 6.9 days from 5 days a month ago, although it is still down from the top of 8.7 days during last year’s pre-Christmas rush.
In Europe, what Russia calls a “special military operation” in Ukraine has meant that several large shipping companies have stopped transports to the Baltic Sea and the Black Sea.
Several important European countries have also banned Russian-flagged ships from their ports. This has redirected the flow and is driving increased container ship activity to European ports.
The total turnaround time for the three largest European container ports, Rotterdam, Antwerp and Hamburg, is 8%, 30% and 21% above their normal five-year levels, respectively.
“Significant compression of ToT times is required before we can reliably propose a path towards normalization of shipping costs,” said RBC analysts. “The problem? Things are getting worse.”