Yes, the Port You're Shipping to Matters. Here's Why

Yes, the Port You're Shipping to Matters. Here's Why

As Freight Forwarders, our world extends far beyond the shipping container. To serve our customers well, we need to be aware of the broader topics that affect ocean freight shipping, from tariff disputes and global economics to overall trends in logistics and e-commerce. But one factor that is often overlooked is something far closer to home: ports themselves. New, expanded, and upgraded ports don’t pop up overnight, so it can be difficult to notice slow-motion change. So to highlight recent developments and put them in context, here are four factors that affect the origins and destinations of your containers.

Size

Despite recent trade troubles, global freight volume continues to increase, and many ports are expanding to meet that need. For example, the Port of Houston is investing $1.2 billion to expand and optimize their handling capacity, while the Port of Shanghai began a $1.79 billion expansion plan in 2014 that would increase its TEU capacity by 40%. The Port of Singapore will add 15 more berths by 2020, and ports in the Philippines have been rapidly expanding as the country looks to take advantage of their location along trade lanes.

Bigger ports handling more TEU’s means more ability to accept cargo -- and that affects both price and availability of capacity. These are factors to consider when advising your customers and when finding the most efficient transit to serve them well.

Technology

To effectively compete, ports aren’t just getting bigger, they are also turning to technology, especially in the realm of automated handling. Last year, the Yangshan Port in China opened a 2,350-meter harbor that houses a fleet of 130 automated guided vehicles.

One of the simplest changes is a move away from paper documentation. The port of Rotterdam is testing paperless bunkering through an app. But that’s just the beginning. Another notable trend is employing technology to give customers more visibility into their entire freight transaction. For example, Khalifa bin Salman Port in Bahrain is testing a customer portal that allows its customers to track deliveries, schedule pickups, make payments, and more.

And we gazed even farther into the future with this previous blog posts looking at how things like the blockchain and artificial intelligence are beginning to change our business. As every step of the logistics chain has embraced technology to increase efficiency, it was only a matter of time before ports fully boarded the tech train.

Location/Geography

There’s a reason why the biggest ports are where they are: they generally require a deep-water harbor with access to inland channels and oceans, and are strategically located to handle high cargo volumes. Understanding the geographic logic of ports triggers intriguing and less-appreciated factors.

Why is the Port of Shanghai the busiest port in the world? Besides the enormity of the market it serves, it is at the midpoint of China’s east coast, and it is well-integrated into the Chinese state highway system … which means shorter transit times to and from more inland locations. With respect to waterways, it is the gateway to and from the East China sea, which connects it to global trade, and it sits on the Yangtze River, which runs through central China giving imports and exports a waterway to travel on.

Other ports around the world are also affected by geography in different strategic ways. For example, because of the Port of Los Angeles’s proximity to eastern China, almost a third of its handled tonnage is from Chinese imports. And the Port of Rotterdam sits on the English Channel, near the UK, and as an entry point for landlocked Europe.

Read more: The Top 20 Global Freight Ports Infographic

But sometimes port locations also come with significant challenges that need to be overcome. The Port of Corpus Christi recently began a $327 million project to dredge 32 miles to deepen their waterway by seven feet, allowing bigger liners with larger capacity to use their facilities. That will, of course, change the shipping dynamics (and economics) on the Gulf of Mexico, and is another example of how keeping abreast of port developments can help freight forwarders facilitate more business.

Climate

As we saw with last year’s Atlantic hurricane season affecting the Caribbean, the Gulf of Mexico, and especially Houston and Puerto Rico, changing climate can be enormously disruptive to ocean trade. Heavy rains can lead to flooding, which can cause extensive shipping delays. An extreme example was how Hurricane Katrina halted activity on Gulf Coast ports like the port of New Orleans. Gulf coast ports handle much of the US import of oil, which led to gas shortages and skyrocketing prices on fuel -- which made this a disruption not just for shipping but for the entire US economy.

We are of course powerless to affect the climate (at least in the short term), and it is notoriously difficult to predict even short-term adverse weather events. Ports are now investing in more “weatherproofing” measures, and port engineers are working hard to ensure ports avoid weather-related disruptions. But even then, everyone in the logistics chain -- including, and especially, Freight Forwarders -- need to think about contingency plans for the increasingly frequent situations when blue skies turn to grey.

These are just a few of the factors -- both positive and negative -- that affect a port’s impact on the ocean freight business. To focus on the positive, bigger port capacity and upgraded technology often reflects the need to accommodate greater trade volume. But it also stimulates new demand at that location.

Ports aren’t just part of the background; they offer an opportunity to think out of the box and develop new opportunities for profitable business.


For more insights on the future of logistics, check out our Resources Library.

By: Fauad on July 13, 2018, 10:34 a.m.