Due to traffic jams at world ports due to a load of orders towards the end of the Corona virus era, the world’s largest shipping companies have reversed the trend of recent decades in ordering ships of increasing volume. Now the bowl has been turned upside down and the demand for small ships has increased. Smaller merchant ships allow quick use of visits to destination ports, the lines to which regular shipping companies are committed, as well as better utilization of the containers that are also in short supply.
Today, more shipping companies are ordering relatively small ships with a cargo volume of 7,000 and 16,000 TEUs to save on operating expenses, including labor that is in short supply.
Orders for new merchant ships are at their highest rate since the peak of the previous business cycle for ships in 2007. Since the last quarter of 2021, orders have been accumulated for 115 merchant ships with a total volume of 1.1 million TEU, which is a 20-foot, 8-foot and 8-foot container unit. . Of course there are containers in other standard volumes. Apparently, the increase in merchant ship orders has been going on for close to two years. Shipping companies are now trying to catch the wave of huge increases in sea freight rates, and are therefore accelerating container ship orders. The price of container transportation worldwide rose on average from $ 1,400 per container to a peak of $ 11,100 per container on September 10, 2021.
Inflating inflation
It is estimated that orders are 12% of the current sea freight volume. Maritime transport is the lifeblood of the world economy and the necessary supply chain for the world economies and the lives of their inhabitants. The global supply chain has been hit, and is among the causes of the surge in global inflation at the maximum rate for decades. About four-fifths of the world’s trade volume is made at sea. In the last two decades, the volume of sea transport has increased at an average annual rate of 2.9%. In the year of the corona eruption (2020), the volume of sea transport decreased by 3.8% – less than expected – to 10.65 million tons. The invention of the container ships and the containers on board in 1958 caused a world revolution. The value of goods in containers today is 60% of the value of goods in world maritime trade, but 35% of the volume of maritime trade.
The tendency to use small ships allows for flexibility and profit in operations according to the changing needs of orders and traffic jams at world ports. Prior to the outbreak of the Corona virus, shipping companies ordered 24,000 TEU ships to take advantage of size and save on transportation costs, including manpower. The viability was clear, although the mooring cost of the large ships was high and the time required for mooring was longer respectively.
The construction of containers in the world is also currently in progress – the expectation for the coming years is at a growth rate of 12% per year. About 300,000 containers are produced each year, but some already cease to serve their owners after 10-12 years and some become warehouses in the yard of businesses or ports. The increase in the number of containers in the world will push down transport prices after the rise in maritime transport costs during the Corona virus. Currently, 23-38.5 million containers or equivalent containers with a volume of 20 TEU are in use, of which 6-10 million are new containers. Other reasons for the partial transition to small merchant ships: congestion fines at ports, delays and lack of containers to quickly fill the deck on large ships.
Shipyards in China, South Korea and Japan, which build merchant ships, cannot meet the accelerated requirements. It is estimated that the volume of transportation by container in the world will increase in the coming years at an annual rate of 8% – which will lead to a reduction in the pressure of global maritime transportation prices.
The present advantage will be for ports with increased automation, accompanied by real-time tracking computer systems, which maximizes the speed of unloading and loading movements. By the way, the most efficient ports in the world are the Arabs located in the Middle East.
The Arab League
According to an index by The Container Port Performance, developed by the World Bank and the global research system of the rating company Standard & Force, evening ports are located at the top of efficiency. In first place in the world is the Saudi port named after King Abdullah, which transports 97 containers per hour compared to only 26 in the US coastal ports. In second place is the port of Saleh in Oman, in third place is the port of Hemed in Qatar and in fourth place is the port of Khalifa in Abu Dhabi. These Arab ports occupy four of the top five places with two more representations in the top ten: the port of Tangier in Morocco in sixth place and the port of Jeddah in Saudi Arabia in eighth place. The Port Efficiency Index for 2021 examines how long it takes a ship to stay in port during the unloading of goods, from its entry into the port until its departure.
Of course, the index takes into account several parameters, including the size of the ships and the number of containers, in order to be comparable. The World Bank says digital technology and alternative green fuel systems are making ports more immune to density and more efficient in operation. The investments of Middle Eastern countries, rich in containers and infrastructure in ports, including advanced technology, have proven themselves.
In general, any country that wants to move to a closed interface with relatively slow growth for an export-oriented economy and an player in the international trade arena, must invest in its port infrastructure – this is a necessity for growth and a higher standard of living. Sophisticated ports increase production and distribution and require logistical warehouses, thus contributing to employment. The World Bank notes that inefficiency in the ports of developing and poor countries actually prevents them from developing, harms employment, raises import and export prices, and leads to poverty among residents.
In the absence of efficient ports, road systems and supporting railways are not built for this purpose. According to the World Bank and the research department of Standard & Force, Chinese ports have proven effective in addressing the challenges posed to them during the Corona virus era. China’s ports – Yangshan in Shanghai, Ningbo and the southern port of Guangzhou – are also in the top ten most efficient seaports in the world. Yokohama Port in Japan last year dropped in efficiency to tenth in the world. The World Bank’s index identifies opportunities for streamlining the benefits of world trade. According to researchers, doubling the efficiency of ants is tantamount to reducing the distance between the world’s designated ports by half.
There is nothing new in the West
Just as the U.S. lags behind the world in every issue of infrastructure: roads, tunnels and bridges, so it lags behind in port efficiency. Ports on the west coast of North America are in bad places. 29 and the port of Halifax in Canada is only in 46th place. Even the port of Cartagena in Colombia is in a better place than the Americans and is in 12th place in efficiency. In 35th place, the port of Hong Kong in 50th place, the port of Tripoli in Lebanon in 87th place, the port of Piraeus in 101st place and the port of Limassol in 14th place in its efficiency (partial list).
You are probably under stress Where do Israeli ports stand in their efficiency? In Israel, hell for importers, suffering for exporters and the scourge of saying prices to consumers. We are the ones paying the heavy price because of the overcrowding in the ports due to the delay of dozens of ships at sea – which is rolling into the consumer price index and inflation.
The table does not lie: the port of Haifa is in 196th place in its efficiency and the port of Ashdod in 32nd place! The incompetence of the Minister of Transportation, Merav Michaeli, is shouting at everyone with their eyes in their heads. Is it any wonder that the productivity of the Israeli economy has been low for decades? Is it any wonder that state institutions, such as the Bank of Israel, do not understand why labor productivity in Israel is low? Is it any wonder that Israel’s competitiveness in world markets is found only in the high – tech industry, which does not need ports, while the traditional industry lags decades behind the world and impairs the competitiveness of workers in the lower deciles, and from there the path to inequality is short?
If you want comfort, then you can take comfort in the fact that the Port of London is in 347th place, the Port of Beirut in 35th place and the Port of Los Angeles in 3rd place. Is it any wonder that Great Britain has sunk and the US is sinking now?
Perhaps there is hope on the horizon that investments in recent years in shipping companies and port infrastructure will lead to a decline in maritime transport prices, which will lead to a recession in global and Israeli inflation. It will be recalled that some of the maritime transport is still in bulk, and efficiency is also needed there. Freight rates from Southeast Asia to the Mediterranean, ie to our region, have fallen by about 9% since the beginning of March after the new rises during the peak of the corona. Evidence of this can be found in a real slowdown in the rate of increase and even in the decline in furniture prices in Israel after the jump last year.
The decline in the transportation prices of the containers has also affected the prices of goods arriving at ports around the world in bulk. Since the beginning of March, the price of copper in the world has fallen by 3%, the price of aluminum has fallen by 19%, the price of steel has fallen by 5% and the price of wood for construction has crashed by 50%.
What is pushing up prices in the world and in Israel, in addition to the price of oil (which has risen in the North Sea by 18% since the beginning of March), is the price of coal, which has risen by 49% since the beginning of March. The severe closure that has been in China, especially in Shanghai for two months, has now been lifted, and Chinese economic activity is returning to full force, including exports and transportation through ports. It is very possible that we are in the world and in Israel already beyond the peak of the prices of goods, energy and maritime transportation, which caused suffering to the population and showed helplessness among world leaders – from US President Joe Biden, through European leaders to the rift government in Israel.