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Seeing the development of container sea transportation and its scarcity
The issue of container scarcity already existed during the pandemic because many ships did not sail due to port restrictions imposed by several countries.
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lobal international trade has recently experienced several obstacles, one of which is the scarcity of containers. The trade war between China and America also contributed to the increase in container demand. Actually, the issue of container scarcity already existed during the pandemic because many ships did not sail due to port restrictions imposed by several countries. This ultimately hampered export and import trade activities so that many container ships were not operating.
The cessation of the operation of these container ships has led to them being damaged and corroded more quickly if they are not rehabilitated. When the global economy started to recover, the demand for container ships increased significantly. But the vessels needed are not ready to meet the demand or are being repaired or renovated. This is also what makes containers rare.
In addition, there has also been congestion in the main ports of developed countries. The surge in trade activities has made several ports full at the same time, so many ships have had to wait and were late to return to their country of origin. This has happened in United States, European and Chinese ports, which caused ships to be late returning to Asia. This also has an impact on cost, which come out to be greater because of the long waiting for the loading and unloading process at the ports, which also require greater fuel consumption. The increase in costs also has an impact on the increase in freight rates.
Freight rates have increased due to the lack of smooth export and import activities and the lack of availability of ships. On Sept. 10, Global Container Freight Index data showed a 425 percent year-on-year (yoy) increase to US$11,109 from $2,112.
Actually, the shipping market in Indonesia is very large and grows every year. This is reflected in the large volume of Indonesia's import-export trade. However, we do not yet have enough capacity to accommodate this. The total capacity of Indonesia's own shipping fleet has decreased. In 2020, the total capacity of Indonesia's shipping fleet decreased by minus 5.9 percent to 48.7 deadweight tonnage (DWT) from 51.7 DWT in 2019.
Apart from the problem of container scarcity, Indonesia also needs to think about developing the sea transportation sector in the long term. In the current pandemic era, sea transportation, especially freight transportation, is very much needed. This supports the acceleration of economic growth, and people's mobility will also increase the demand for goods.
Indonesia’s first task is fixing its infrastructure problem. Unequal infrastructure development will have an impact on connectivity, both in terms of transportation and logistics modes. This also leads to high logistics costs and price disparities in eastern Indonesia. We know that the sea highway program has become a bridge for connectivity between regions in Indonesia, the achievements of which can be felt by local communities with the massive implementation of the marine highway program. Connectivity between regions in Indonesia, especially the eastern part, must be improved and price disparities must be suppressed so that economic equality in remote areas can be achieved.
With improved infrastructure, an integrated logistics ecosystem will emerge. The construction of sea toll roads, land toll roads and deep seaports to accommodate large ships, the shipping industry and maritime tourism must be carried out in order to make Indonesia the world's maritime axis. Ports should be designed to have sufficient depth for large ships to dock. And then there’s the problem of logistics costs, which are still high due to suboptimal port operations and infrastructure. Therefore, we think the government should speed up infrastructure development, such as ports and toll roads, to improve the delivery of goods.
Second, there is a mismatch between the type and size of the containers used for exports and imports. This can occur due to an imbalance in the amount of imported and exported goods. For example, for the export of an item using a large container, the backflow is very little so a small container is used. This is what makes the next export require large ships.
The availability of containers in a country depends on the frequency of imports to be efficient. During the COVID-19 pandemic, there was a decline in Indonesian imports, which resulted in fewer containers entering Indonesia. With limited containers, exporters and importers in Indonesia felt there was a scarcity in containers, especially those of 40 feet. Furthermore, the pressure of rising transportation costs cannot compensate for the added value of the exported commodities. Indonesia must have large ships that can compete internationally.
The third is the issue of standardization, such as the standardization of ports and ships to reduce port inefficiency. This standardization will shorten the docking time of ships, which will have an impact on the smooth distribution of goods as one of the objectives of the existence of the sea toll concept. In addition, the standardization of ships is needed for Indonesia to be able to compete on the international stage. This improvement in the standardization of ports and ships in the long term will have a positive impact on Indonesia.
The solution to overcome the current scarcity of containers is that the government, through the Trade Ministry, must provide containers to fulfill export transportation by collaborating with related parties, such as the Indonesian Chamber of Commerce and Industry (Kadin), the Indonesian Logistics and Forwarder Association and main-line operators (MLO). MLOs can bring together container carriers and those who need containers so that the flow of goods for export activities can run smoothly. The Trade Ministry is also building an integrated supply-demand container service.
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Analyst, Bank Mandiri
