Measuring the impact of port congestion on containership freight rates

• We examine the impact of port congestion on containership freight rates. • There is a positive and significant effect of port congestion on containership freight rates. • The effect on freight rates is driven mostly by the importing region and less by the manufacturing region. • The results are in line with the “last mile problem” and the derived demand system in shipping. We examine the impact of port congestion on containership freight rates. Our overall results show that port congestion has a positive and significant effect on containership freight rates. The most important region is Asia, where a 1 % increase in port congestion has a >1 % effect on shipping freight rates. This suggests that the region, being the world's largest manufacturing area and an integral part of the supply chain, has much more importance than previously considered. As such, the results highlight the importance of the manufacturing region in supply chains and are also in line with the derived demand system in shipping. As per the results, a return to the pre-pandemic congestion levels in Asia would lead to at least a 25 % decline in containership freight costs.