The Impact of Port Congestion on Construction
Port congestion in California is reaching peak numbers, and the same issues also are growing on the East Coast. In addition, a rise in COVID-19 cases in China recently led to a terminal closure in Ningbo, the world’s third-busiest container port. This development has increased overcrowding at other Chinese ports and led to worries about intensified congestion at Western ports when Ningbo’s backlog is eventually released.
You can see the current marine traffic of tankers, bulk carriers, cargo, and container ships in the Ningbo waters as of Friday August 20th, 2021 (Map: MarineTraffic). One critical thing to keep in mind is that current port congestion could reach new levels.
Although the global economy has experienced supply chain issues related to port congestion several times over the past year and a half, things might be more difficult this time around.
In the first quarter of 2021, port congestion was eased by lower vessel supply. With ships stuck in port waiting to unload their cargo, there were fewer ships available to pick up exports, eventually reducing overcrowding. But with new trans-Pacific services added since then and an increase in one-off voyages, congestion could last longer.
How port congestion is affecting construction
Signs of port congestion impacting construction across the globe have started to appear. Construction industry growth in the U.K. has recently slowed, for instance, due to a shortage of supplies and labor. Part of the slowdown is a result of transport problems and trade friction caused by Brexit, but port congestion has also contributed to the problem.
Construction companies in the U.K. have seen higher prices for supplies, as well as shortages of cement, copper, steel, and other materials. On top of this, a majority of businesses have reported having to wait longer for their deliveries, further delaying their projects.
Although port congestion’s impact on construction in the U.K. has become noticeable, there are signs that it might also take a toll on construction in the U.S. With a strong demand for general imports putting pressure on the supply chain, the service, manufacturing, and construction industries are starting to feel the impact.
In particular, many construction sites have experienced a stall in hiring because of a shortage of building materials and higher prices for lumber have made homebuilding more difficult. As an example, here is the marine traffic map of the current ships at anchor in Los Angeles and Long Beach as of Friday August 20th, 2021 (Map: MarineTraffic)
What to know about materials and equipment
Earlier this year, the high prices of lumber consistently made the news. Lumber prices have since dropped dramatically, although they still sit comfortably above pre-pandemic levels. Some experts predict a new rise in prices in the final months of 2021. The reasons? Increased demand arising from the recently passed federal infrastructure bill and diminished supplies caused in part by port congestion.
Unsurprisingly, on-the-ground inventory of lumber has shrunk. At the same time, suppliers have continued to accept new orders. That means construction companies should be wary of estimated arrival dates and should prepare for the possibility that shipments may arrive later than expected.
Specialty materials — including tiling, flooring, and more — could also be affected by port congestion, especially if they are sourced from global manufacturers. Previous supply chain issues have tended to have an impact on these materials, so it’s a good idea to keep an eye on your supply chain and closely monitor any potential issues. Although we haven’t yet seen a noticeable shortage of construction equipment, previous blockages have made it harder for companies to get their hands on the tools and machines they need.
Global marine traffic through the Panama City canal is showing increased traffic. The picture to the left is of current ships at anchor and awaiting passage through the Panama City canal as of Friday August 20th, 2021 (Map: MarineTraffic)
The outlook: rising prices
Port congestion is just one force that will impact construction heading into the rest of 2021. And while material shortages could be a result, construction companies should be most concerned about rising prices for materials. In the worst projections, some experts see inflated material costs for construction continuing through 2022.
Companies should remain on the lookout for developing trends and keep a close eye on their supply chains as the year ends and we head into 2022. For more insights into the future of the construction industry and advice about how to adapt to developing trends, start by contacting Alliance today.