Shipment term

Will Singapore’s massive new transshipment port unravel global supply chains?

By Ann Koh and Kyunghee Park (Bloomberg) As global economies struggle to unravel unprecedented congestion in global supply chains, one of the world’s busiest ports is backing an ambitious modernization plan to provide solutions.

Singapore is moving ahead with a 20 billion Singapore dollar ($14 billion) project to build the world’s largest automated port by 2040, which will double existing space and feature drones and driverless vehicles . The city-state began operations at two new berths last year, and construction work continues on the next phase.

It is becoming increasingly urgent for ports to increase their capacity and speed, as the pandemic has changed the nature of global supply chains. The just-in-time shipping system has collapsed as exporters in Asia face obstacles getting goods to customers in the United States and Europe, and the situation has only gotten worse this year with the Covid lockdowns in China and the war in Ukraine.

Ports are the most visible choke points in the $22 trillion arena for merchant trade, and a long overdue transformation will require tackling a myriad of issues. Terminals are constrained by declining technology and limited space, while inefficiencies are compounded by the backlog of containers at yards and a shortage of workers and trucks.

Located in the Strait of Malacca, Singapore is a regular stop on the container routes that connect Asian factories with European consumers. The port, which handled the most transhipped cargo in the world in 2020, weathered the pandemic in better shape than most of its peers.

“Singapore is the world’s largest transshipment hub, a position it will hold for years to come,” said Choi Na Young Hwan, head of the Korea Maritime Institute think tank’s international logistics analysis team. “Singapore is positioning itself as a benchmark for other ports.”

Here is an overview of Singapore’s vision for its mega-port:

Space and investment

Space presents a significant limitation for ports handling tens of thousands of containers per day, especially when trucking and shipping schedules are disrupted. The need for more space became apparent during the pandemic, as docks overflowed with containers and some ports had to place crates alongside routes to await transport.

Singapore, a densely populated island slightly smaller than New York, would seem a difficult place for expansion. But the city-state, facing growing competition from rivals such as Shanghai, began allocating funds in 2013 to reclaim the land needed to build a new port, Tuas, on the country’s west coast. The port will eventually double its capacity to 65 million twenty-foot equivalent units (TEUs) by 2040.

The plan, put in place long before the supply chain shake-up began, now looks prescient. The expansion has provided much-needed space to effectively manage operations and lift the city beyond the current pandemic, said Ley Hoon Quah, chief executive of the Maritime and Port Authority.

The major investment has also taken place as other governments and businesses have withheld spending at ports. Shipping consultancy Drewry expects around 30 million TEUs of capacity to be added per year from 2021 to 2026, down 25% from the 40 million TEUs added annually over the past of the decade until 2020.

“Tuas capacity is coming online as the industry continues to face port capacity shortages,” said Ocean Network Express CEO Jeremy Nixon. “Singapore will be able to look after its existing business and continue to grow in 2022 and 2023 because of this.”

Singapore port infrastructure

Once Tuas is complete, Singapore will shut down all of its existing capacity and move everything to a bigger space there. The three city terminals of Tanjong Pagar, Keppel and Brani will all close and move to Tuas by 2027, while the Pasir Panjang terminal will be consolidated by 2040.

This will help consolidate operations into a more logical structure, enabling faster handling of containers, which reached a record 37.5 million last year. The new arrangement will reduce the need for trucks to cut through downtown traffic while transporting goods from one terminal to another.

Shortening the queues of trucks waiting at terminals is crucial for all ports. This is a major reason for bottlenecks, which are delaying the movement of goods during the Covid shutdowns in Shanghai and causing significant delays in clearing boxes at California ports. Trucking risks were also highlighted earlier this month when striking drivers in South Korea wreaked havoc on supply chains.

The Port of Singapore’s performance during the pandemic “has not been without hitches and delays in terms of congestion, but neither has it seen the major episodes of crisis that other transhipment hubs have experienced”, said Daniel Richards, Associate Director at Maritime. Strategies International Ltd.

Marine technology

Investing in ports is not just about building more roads and trucks. It’s also about improving the port’s ability to track and coordinate what’s happening at sea with all the moving parts needed to move containers ashore.

Singapore will operate automated guided vehicles to move more containers between yards and berths where ships wait. A human driving a truck will use sensors and wireless communications to direct a convoy of driverless vehicles in and out of the port. Drones will be used for shore-to-ship deliveries and will assist security officers during checks.

The upgraded technology will save labor in the global labor crisis. But the Port of Singapore wants to take it a step further by integrating information systems that allow it to track cargo and communicate peaks in demand to everyone in the supply chain.

Singapore is part of a growing trend for seaports to reduce paperwork processes. It is one of seven jurisdictions worldwide that accepts electronic bills of lading, a key supply chain document that must be submitted or retrieved from ship captains before cargo can be unloaded from ships.

This change is a big step up from the decades-old practice of submitting physical documents to verify shipments. The process became a major headache during Shanghai’s lockdown as there were fewer people at ports to deliver documents, bringing business to a halt.

One-stop shop

Singapore’s strategy is to stand out from the competition as global delays force ships to rethink where to stop along their route, said MPA’s Quah. The port’s goal is to become more efficient so that ships can meet all their needs: from banking and refueling to unloading containers and storing them until the next ships are available, she said.

Admittedly, Singapore has several strengths that are difficult to copy elsewhere.

As a ferry, it does not have to bear some of the burdens faced by major end destinations such as China, the UK and California. These ports face more congestion due to imports that need to be transported from ships to locations across the country and the flow of exports trucked to the ports.

Government influence on imports work and unions also allow for smoother operations. For example, it is more difficult for workers in Singapore to strike than in many other ports, limiting the risk of backlash from unions that have complicated automation efforts.

Still, Singapore’s plans offer a possible way forward for other ports.

“There is clearly a strategic requirement for every country to look at its supply chain and ensure that container operations run smoothly because if not, it will cost the economy “, said Nixon of ONE.

By Ann Koh and Kyunghee Park © 2022 Bloomberg LP