Kuehne+Nagel Global Port Update Flags Congestion Across Africa, Asia and Europe

The Analysis

Spread the map out on the table and read it the way I was taught to read it, which is to say: do not start with your own port. Start with the shape of the week. Kuehne+Nagel published its port operational update on 23 June, covering 17 to 23 June, and inside that one week four separate parts of the map went amber at the same time. South African ports were disrupted by the COSATU protest action of 19 June. Chinese terminals were working through dense fog with yards already at high occupancy. Hamburg and Rotterdam were both reporting that what they are short of is equipment and labour. And the Gulf was watching Hormuz. The last line of that summary is the one I keep coming back to: the volatility is still there as we walk into the summer peak.

I spent the first half of my career on the other side of this map, in terminal planning and then in shipping consultancy, and the thing I want you to take away is not that four places had a bad week. Ports have bad weeks; absorbing them is what a port is for. What is unusual here is that four nodes on three continents degraded inside the same seven days, which means the substitution you would normally reach for is not sitting there waiting for you. A problem in one terminal is a schedule problem and you can plan around it. A problem spread across Africa, Asia and Europe simultaneously is a network problem, and network problems do not clear when the weather clears.

Ten years ago this map would have read differently, and not by accident. The constraints we used to write about were water, berths and crane productivity, and those are constraints you can fix with concrete, steel and a purchase order. The ones in this update are a yard with no slack, a workforce that is not there, and a strait that nobody can widen. That is the change I want to talk about, because it changes what you should be buying and how you should be choosing your gateways.

What follows is my reading, and I will tell you where the reading starts and the fact stops. The facts are all in the paragraphs above: one update, published 23 June, covering 17 to 23 June, with South African ports disrupted by the 19 June protest action, Chinese terminals under dense fog with high yard occupancy, Hamburg and Rotterdam constrained on equipment and labour, the Gulf monitoring Hormuz, and volatility flagged into the summer peak. Everything after this is inference built on twenty-odd years of looking at terminals, and you should treat it as such.

The instinct when a weekly port update lands is to scan it for your own gateway and, if yours is not named, close the page. I would like you to do the opposite this time. The value of a seven-day snapshot like this one is not the individual line items; it is the fact that the line items are standing next to each other. Four pressures, three continents, one week. If your gateway is not on the list, the question is not whether you are safe. The question is what happens to you when the gateway you would have diverted to is on the list.

Start at the south. South African ports disrupted by a nationwide protest action on 19 June. A protest of that kind does its damage on the land side, because that is where the work depends on people being able to get to the place where the work is: the gate, the access roads, the shift that turns up for the afternoon. A terminal operator cannot answer that with an extra crane. Reading it this way matters to you, because it tells you what kind of delay to expect. Not a berth queue you can watch on a vessel schedule, but a slower, stickier failure at the boundary between the port and the country behind it.

Move east and north. Chinese terminals, dense fog, high yard occupancy. Two different kinds of problem occupying the same piece of ground, and the combination is worse than either one alone. Fog is weather; it closes a berth window and then it lifts, and if the yard had room you would lose two days and get them back on the third. High yard occupancy is structure. It means the terminal has already spent its slack, and a terminal with no slack cannot work off the queue after the fog lifts, because there is nowhere to put the boxes it wants to move. This is the misreading I see most often on the importing side. People see a two-day weather event and plan for two days. What arrives is the weather plus the recovery, and the length of the recovery is set by how full the yard was before the weather turned up.

If you want a single mental model for the last decade of port investment, take this one. We got very good at building berths and not much better at building yards. Bigger ships forced longer quays, deeper water and taller gantries, and the capital followed, because a quay is the thing you can stand on at an opening ceremony. The yard is the back lot, the ugliest line on the land budget, and the item that gets pushed to the next phase at every expansion. So every increment of throughput added in that decade has to turn over on the same back lot, and the faster a back lot turns, the less it can absorb. Ten years ago this was a different place in the sense that actually matters: it had room to be wrong.

Now the two European names, and I want to slow down here, because equipment and labour are not the same kind of shortage and they do not have the same cure. Equipment is a procurement problem. You specify the machines, you place the order, you rebuild part of the yard around them, and two or three years later the constraint is gone. Labour is a decade problem. It is wage rounds and shift design, an ageing workforce in countries that are not producing enough of the people who can do this work, and a bargaining calendar that nobody in your logistics department controls. When a hub tells you the shortfall is machines, you can put a date on the fix. When it tells you the shortfall is people, you cannot, and the honest planning assumption is that the constraint persists.

Hamburg and Rotterdam are also not interchangeable, which is the second thing people get wrong. They are not two berths in the same room; they are two doors, and the rooms behind them are different. If you move between them you are not changing a port call, you are changing the last leg of a door-to-door move: the inland carrier, the depot, sometimes the warehouse the goods are eventually supposed to reach. That is why a substitution that looks free on a map costs real money and real time on the ground, and why it belongs in a network plan rather than in the bag of tricks you reach for in a bad week.

Then the Gulf, which I want to separate out from everything above because importers habitually lump these together. A congested port is a node, and nodes have neighbours; there is usually another port further away with a worse inland leg, and that is your substitution. A chokepoint is a piece of water that most of the network has to pass through, and the substitution for a chokepoint is not another port. It is a different route with a different transit time, or a different country of supply, and both of those change the shape of your network rather than the date on your schedule.

The update's word for the Gulf is that the situation is being monitored. Monitored is not disrupted, and I am not going to tell you it is. What I will say is that a chokepoint sitting on a watch list is the one item on this page that can change the shape of your network, and it deserves a line in your plan rather than a shrug.

So what does any of this do to the set of door-to-door combinations you can actually choose from? When the middle of a network tightens, the first thing that disappears is not capacity. It is variety. The optional call gets dropped from the string. The second carrier stops taking your box to that terminal. The late booking that used to work at four days stops working at four days. Your menu gets shorter before any price signal reaches you, and it gets shorter in a way your freight dashboard will never show you, because nothing about a quieter menu looks like an exception to anybody.

Write your own menu down, and I mean that literally. For each of your main lanes, take the two gateways you would consider and write on one page what each of them really gives you: the inland carrier you use out of it, the depot your empties go to, the free time in your contract, the cut-off you book against, and the second string that also calls there. Most importers cannot produce that page in under a week, and that inability is itself the finding. If you cannot say what your second option is, you do not have a second option. You have a hope, and hopes do not survive a full yard.

While you are at it, write down who loses inside your own business when a menu shortens. Not the freight budget, which will look fine for a fortnight. The order desk that promised a date, the planner who now has to hold more stock to hit it, the customer who reorders later next time because the last one arrived in two shipments instead of one. The cost of a shrunken menu lands in those places, and it lands weeks after the port update that caused it has been forgotten.

Since we are talking about choosing gateways, here is how I would judge one, and none of it is the number in the tender. How many ways out of the gate: two road corridors, rail, barge, or one good road and nothing else, because a port with one good road is a port with one bad day waiting to happen. How much yard slack the terminal runs with, which you get by asking your carrier for the trend over a quarter rather than this morning's figure. The age of the equipment and whether there is a replacement plan behind it, because a fleet eighteen years into a twenty-year life tells you more than any service promise in a brochure. The labour calendar, meaning when the next wage round falls and when the last one was settled. And chokepoint exposure, meaning whether the water your box crosses on the way in can be closed by something other than weather.

Signals, then, because a judgement you cannot trigger on is not a plan. The one I watch hardest is a disruption that outlasts the event that caused it. A fog bank lifts; a wage round does not. When the same constraint is named at two hubs in the same month, as equipment and labour are named at both Hamburg and Rotterdam here, the shortage is structural and the cure is not arriving this quarter. When yard occupancy is described as high at the same terminal in two consecutive snapshots, you are looking at a terminal that has lost its shock absorber. When a chokepoint moves from a watch list to an advisory, the substitution you need is a route, not a booking. And then your own data, which beats all of mine: a gateway that misses your planned transit in two weeks out of four is telling you something no port update will ever print.

Here is the arithmetic, and I am going to show you every number I put into it so that you can throw away the ones you dislike and put your own in. Suppose you move 48 forty-foot containers a month out of South China into northern Europe. Suppose 26 of them are planned through Hamburg, 18 through Rotterdam and the remaining 4 go wherever the space is. Suppose the equipment and labour constraint at those two hubs adds two days to the time a box spends inside the terminal. Stop at that number for a second: the report says there is a constraint, it does not say how many days, so two days is mine, chosen because it is what I have watched a constrained terminal do to a box, and you should replace it with your own observed dwell.

Two days on 48 boxes a month is a flow of about 1.6 boxes a day, which means roughly three extra boxes sitting in the pipeline at any moment. Suppose the goods in each box are worth 60,000 on average and your cost of working capital is 8% a year. Three boxes is about 190,000 of goods held longer than you planned; 8% of that is roughly 15,000 a year, call it 1,250 a month, a little over 25 a box. Then suppose the same two days make you hold one extra day of safety stock, because you no longer trust the transit: one day on that flow is another box and a half, call it 90,000, and another 7,000-odd a year of carrying cost.

So the visible cost of two days on this lane lands somewhere in the low twenties of thousands a year. I would put that number next to the cost of qualifying a second gateway, because qualifying a gateway is a project with an end date, while two days of constraint is a monthly habit.

One more thing I would change about how you read these updates, and it costs nothing. Keep them. Not this one, all of them, in a single file, twelve weeks deep, with your own transit performance next to each week. A single snapshot tells you what happened; a run of them tells you which constraints are weather and which are structure, and the difference between those two is the difference between waiting and acting. I have never met an importer who regretted keeping that file, and I have met a good many who wished they had started it a year earlier, because the argument about whether a gateway has really deteriorated is almost impossible to win from memory and very easy to win from a series.

Alternatives, and where they bite. Moving between Hamburg and Rotterdam buys you very little in a week when both are constrained on the same two things; the stronger substitution is a different range entirely, a Mediterranean gateway with a longer inland leg, or a different timing. Pulling a shipment forward by a week costs you inventory and buys you schedule integrity, and in a week like this one that trade is usually worth taking on anything with a date attached to it. Air freight rescues the slice that would otherwise stop a production line, and only that slice, which means you need to know which of your boxes those are before the week begins rather than during it. Moving the sourcing country, or moving part of it closer to the market, is a decade-scale answer to a one-week problem, and the only reason to open that file now is that the file itself takes years; the congestion in this update is not what justifies it, the calendar is.

The traps are predictable and people still walk into them. The first is treating a seven-day snapshot as a forecast: this update covers 17 to 23 June, it is not a statement about July, and a booking plan built on it will be wrong in both directions. The second is measuring the berth and not the gate. The South African disruption in this update is a protest, and the damage from a protest lands on the land side; if your KPI is vessel turnaround you will be looking at green while your container is not moving. The third is contractual free time: the number in your contract is the number that counts, and the number you remember from the last negotiation is usually not it.

The fourth is timing your buffer to the peak rather than to the pre-peak. The update names the summer peak, and the slack you will need in July has to exist in June. The fifth is fixed call patterns: if your contract names one terminal, you are the last box protected when the yard is full, and no amount of escalation changes the order in which a constrained terminal serves its customers.

Put the map away. What has really changed over my working life is not the size of the ships or the height of the cranes, though both have changed beyond anything anyone would have predicted when I started. It is the network: thinner buffers, more doors that open into the same room, and a handful of chokepoints that no amount of terminal investment will widen. Ten years ago this map was a different place, and in ten years it will be different again. The only thing that travels well between those two maps is a plan you are willing to rewrite.

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— By Tomás Ferreira