New UN container port index: Shanghai tops in connectivity

New UN container port index: Shanghai tops in connectivity

Shanghai, serving a vast hinterland market within China, has overtaken Hong Kong, which UNCTAD had listed as the top port since 2006. Photo credit: Shutterstock.com.

In the rollout of a new index measuring container port connectivity and placing Shanghai at the top, a United Nations agency urged container ports to invest in digitization and infrastructure and connectivity with their hinterlands to expand their container service networks. 

The Liner Shipping Connectivity Index (LSCI), published by the United Nations Conference on Trade and Development (UNCTAD), was recently updated to include port performance metrics. The UNCTAD report details seven measures that will contribute to working vessels more efficiently while in port, and seamlessly delivering containers to the hinterland: go digital; link domestic, regional and global networks; ensure competition; modernize ports; widen port hinterlands; promote environmental sustainability; and monitor ports’ connectivity.

Shanghai, serving a vast hinterland market within China, has overtaken Hong Kong, which UNCTAD had listed as the top port since 2006. Additionally, Ningbo has doubled its LSCI since 2006. Other ports with high LSCI scores are Singapore, a prominent transshipment port in Southeast Asia, and Busan, South Korea. 

Even if ports perform efficiently, their LSCI scores will drop in the UNCTAD rankings if trade growth slows. Kobe and Nagoya declined over the last decade, “reflecting slower economic growth in Japan and the fact that its ports are less competitive as transshipment centers,” the report stated.

The widening of the Panama Canal in 2016 has resulted in a noticeable shift in container service patterns in the United States. “The LSCI of New York-New Jersey and Savannah on the East Coast of North America grew by more than 20 percent since 2016, while the leading ports on the West Coast of North America have seen their LSCIs stagnate,” UNCTAD stated.

How to boost connectivity 

Investments in port infrastructure and connectivity attract container services. The report noted that Piraeus, Greece, has become the best-connected port in the Mediterranean, and Colón, Panama, has grown as a transshipment port for North America. Although smaller ports normally lack the population density to become major destination gateways, they can grow their business by efficiently handling transshipment services. Generating competition among carriers by mitigating cabotage laws that restrict shipping to domestic carriers promotes growth for transshipment ports.

Digitization is key to improving transportation efficiency throughout the supply chain, and digitization is increasingly important in connecting ports and marine terminals with their customers through improved information sharing. “Digital and physical connectivity go hand in hand,” the report stated.

Ports that assign concessions to terminal operators who are associated with shipping lines through vertical integration attract more business from the lines and their vessel-sharing alliance partners, but vertical integration “could discourage other lines from calling at the port, and could limit choices available to shippers,” according to the report.

Investing in port connectivity between countries will also contribute to growth. In the North American Pacific Northwest, Vancouver and Prince Rupert continue to grow due primarily to their intermodal rail connections with Chicago, Memphis, and New Orleans. The much larger US market provides greater growth opportunities than the Canadian market. 

Although turning vessels faster in port is generally a positive metric, vessels calling at large urban ports such as Los Angeles-Long Beach and New York-New Jersey have high container exchanges, so they naturally require more than a single work shift to turn a vessel. However, the largest ports with container exchanges of 10,000 TEU or larger must also strive to work the mega-ships more efficiently, the report indicated. “In addition, being able to accommodate ever bigger ships can improve ports’ attractiveness as hubs,” the report stated.

Port optimization is enhanced when ships “only arrive at the right time,” but this metric is challenged today by poor liner performance globally, especially in North America. SeaIntelligence Maritime Consulting noted that on-time performance in the eastbound Pacific last year sank as low as 40 percent. The UNCTAD report noted, though, that once a vessel arrives, “operations should start immediately, without having to wait for authorities to clear paperwork.”

Ports, terminal operators, carriers, and overland transportation providers should also invest in sustainability. “Stakeholders are increasingly demanding that ports deliver on their social, economic, and environmental sustainability,” the report stated.

Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo.