Ocean shipping and the landside container supply chain in to and out of Sydney both remain extremely disrupted despite the cease fire between the union and stevedores. Industrial action from a few weeks ago is the root cause of the ongoing delays.
Shipping is fundamentally delayed; situation is not resolving quickly
Shipping Australia can confirm that there is currently a 21-day delay for some vessels calling at Patrick Terminals in Sydney and all vessel schedules are disrupted to some extent. For vessels calling at DP World Australia, the situation is improving but the average delay in Sydney is still three or four days.
This is the fundamental crux of the matter: when a ship which is due to arrive today is subject to a 21-day delay then it is a disaster for all parties in the supply chain. At best, it will be eight to ten weeks to clear the congestion.
“Every time I open my computer there are notices of delays and changes. It’s a mess,” one shipping line executive told Shipping Australia Limited.
A huge backlog of empty boxes – initially caused by bad weather but then extraordinarily aggravated by industrial action – is contributing to congestion as stevedores are working with shipping lines to help evacuate the empties back to Asia. However, helping to clear out empties is adding a further delays to schedules.
The empties situation looks like it’s about to get a whole lot worse as one of Sydney’s larger container parks, accounting for about 24 per cent of capacity, is being forced to close because of a road-building project.
Visibility of congestion is obscured by ships slowing down or going elsewhere
Ships do not have to be visibly “lining up” in a 40-ship queue off Botany Bay for there to be extreme congestion and delay.
Here’s why: ships can, and do, vary their sailing speed, their route and their destination.
Marine fuel is very expensive. It costs hundreds of dollars a tonne. Many tonnes are burnt per day, per ship in normal operations. As you might imagine, sailing slowly burns relatively little fuel. Sailing quickly burns a comparatively large amount of fuel. So far, so obvious.
But readers may not be aware that a ship speeding up a little bit when it is already sailing fast burns up a disproportionately huge amount of fuel for a tiny increase in speed. Likewise, throttling back on the speed can also save a disproportionately large amount of fuel. This graph and accompanying text explains the phenomenon in detail.
It is therefore essential for shipping companies to manage their fuel consumption prudently. It is an extravagant waste of money to burn huge amounts of fuel sailing a ship at speed simply to have that same vessel waiting around uselessly in Sydney for weeks at a time for a berth.
Accordingly, if a shipping company knows that a ship will be delayed for literally weeks in Sydney then it will instruct its ship master to slow down, or to go to another port first, so that the ship’s arrival time matches the forecast slot for an open berth.
Shipping companies matching ship speeds and arrivals to when a berth is forecast to be empty for the purposes of fuel economy explains why there are few ships directly waiting outside Port Botany.
It also explains why those few ships that are waiting nearby can easily come and go into Port Botany. They have arrived in time for the forecast open berth window. However, even though you can’t necessarily see it, the substantial schedule delay due to congestion is still present.
Although a ship may be waiting for a day or two off Port Botany, that is on top of a pre-existing 19 or 20 day delay crossing the ocean en-route.
Even when the delay at one port is only three or four days, the cost to the ship can be massive. If a ship is late in one port, then it will probably miss its scheduled window in the next port and be even further delayed. These delays compound until the ship departs its last Australian port. Then it may have to steam at full speed for ten days back to north Asia to regain its schedule.
As explained above, sailing extra fast costs a disproportionately large amount of money in fuel. The differential between steaming at a planned 18 knots to full speed at 25 knots is an extra 200 tonnes of fuel per day – that’s nearly AUS$1 million.
Delays don’t just cause shipping companies to incur fuel-related costs
There are a wide range of other daily operating costs that a ship incurs even if it is not sailing anywhere. Each day of delay wastes those costs. These include daily crewing costs, provisions, lubricants, stores, hull & machinery insurance, finance costs (very hefty on multi-million dollar ships), protection & indemnity fees and management fees to name a few.
Multiply those per ship costs up by the number of vessels in a fleet or a shipping loop and, even excluding the cost of fuel, a day of delay equals a huge daily cost.
There are a variety of other land-side costs incurred too in terms of in-house staff time, management time, legal fees, internal pricing, and many more. All of these expenses have to be costed-up and accounted for.
Where ships are forced to skip Sydney and offload Sydney-destined cargo in Brisbane or Melbourne, they face extra costs for at least two additional lifts plus possible over-stow lifts, terminal transfers, and storage costs. These likely exceed AUD$1,000 per container.
Additionally shipping companies will have to forego other planned cargo on the transhipment service.
Here’s a formula that simply explains the consequences of disruption in the supply chain: each day of delay = chaos and huge wasted costs.
Hear it from NSW Ports
Marika Calfas, CEO of NSW Ports, has recently published a highly useful and informative statement about what is happening at Port Botany. Shipping Australia commends this move as transparency is vital to the smooth operation of the industry.
Unfortunately, some industry executives have focused on the pleasing (but ultimately minor) news in that statement that there are only a few vessels waiting to immediately enter the port. They have taken this statement as evidence that the situation is resolving or has resolved.
It is not and it has not.
The congestion situation was bad, is bad, and will continue to be bad in the near future.
Shipping Australia encourages industry executives to focus on the really important part of the statement by Ms Calfas, which is as follows:
“Following the suspension of industrial action at DP World Australia and Patrick Terminals, shipping schedules remain off-window at all ports and may take a couple of months for schedule integrity to be restored. Containers that should have been handled at Port Botany during September will now be handled during October and November“.
Meanwhile, some shipping lines have had no option but to bypass Sydney and to deliver goods via Melbourne. Those boxes will need to be shipped somehow, whether by land or by sea, to Sydney and that’s a process which could take weeks. It will likely come at a great additional cost to importers and, ultimately, to the end buyers of the goods.