Declining competitiveness of Japanese ports

International Business News  –  The new crown epidemic is exacerbating the decline in the competitiveness of Japan’s ports. In the context of the prolonged chaos in maritime logistics, shipping companies have a negative attitude towards calling in Japan, where there is less cargo, and the number of container ships calling at major Japanese ports in 2021 will hit a new low since 2000. In the context of the reduction of direct routes to major ports in the United States, cargo owners have to switch to international hub ports such as South Korea, and problems such as difficulty in predicting the number of transit days have also surfaced.

Looking at the number of calls of ocean-going container ships at the major domestic ports of Tokyo, Yokohama, Nagoya, Osaka and Kobe, the number of calls in 2021 will be 8% lower than the previous year and 12% lower than that in 2019 before the epidemic. From January to April 2022, it will decrease by 7% compared with the same period of the previous year. At this rate, it is expected that the whole year of 2022 will hit a new low for three consecutive years.

The reason behind this is the chaos of global container logistics. Due to the strong demand for home consumption and labor shortages under the epidemic, there have been more than 100 congestion incidents at ports in the United States and China. Voyage schedules have been delayed significantly, with shipping companies having to skip ports they had intended to call. The world’s major ports such as China and South Korea maintain a sense of presence, while Japan, on the other hand, is an easy candidate for cancellations.

Container shipping itself remains active. In particular, shipments to the US from 10 major Asian countries and regions are growing. Statistics from the American research company Descartes Datamyne show that in 2021, it will reach 20.52 million (converted to 20-foot containers, calculated by the loading port of the mother ship), an increase of 25% compared with 2019 before the epidemic, a significant increase. From January to July 2022, it also increased by 4% year-on-year, maintaining the growth trend.

On the other hand, container shipments from Japan in 2021 will be significantly lower by 16% compared to 2019, and their share of overall shipments will drop to around 1%. The ranking of No. 7 in 2019 has dropped to No. 9 after just 2 years, and the status has dropped significantly.

One of the reasons for the substantial loss of share is the reduction in direct routes from Japan. “Ocean Network Express (ONE)”, a container ship business company established in Singapore in 2017 by three companies, Nippon Yusen, MOL and Kawasaki Kisen, will stop direct routes from Japan to the east coast of the United States in 2021. ONE said it “sees Japan as the most important market”, but due to the shortage of ships due to the epidemic, it is increasingly difficult to maintain services in Japan, where major ports are scattered and time-consuming and labor-intensive.

Shipping officials in Japan believe that “there is a high possibility that direct routes will not be able to resume after the epidemic.” Previous changes in industrial structure, such as the transfer of production bases overseas, have led to a decline in the status of Japanese ports. But the outbreak is exacerbating shipping companies “away from Japan”.

With the reduction of direct routes, Japanese shippers are forced to choose transshipment via other countries. Notably, Korea and Singapore, according to Descartes Datamyne, the ratio of direct routes to cargo originating in Japan dropped to 61% from January to June 2022, down 10 percentage points year-on-year (71%). About 40% of shippers had to ship via other countries.

Japan’s Ministry of Finance pointed out that the increase in transshipment makes the delivery period tend to be longer, there is a risk of reducing the competitiveness of the Japanese manufacturing industry. Especially under the epidemic, the ship is severely congested in the port, with the increase in the number of stops, the number of days of transport is difficult to predict, and the difficulty of inventory management increases. If the number of loading and unloading of containers increases, the risk of cargo breakage will also increase.

Large domestic precision machine companies in Japan said, “It will take 2 to 3 extra days if we transship at the port of Busan in Korea. At the same time it is not guaranteed to enjoy the same conditions in logistics with rival Korean and Chinese companies, which is fatal”. Previously, the competitiveness of Japan’s ports declined more because of the decline in manufacturing. But due to the new normal of the epidemic, container ships are accelerating away from Japan, leading to a further decline in manufacturing status as well. Japan is falling into this vicious circle.