What happens to ships and convoys?
 

I was following a merchant in fog recently, and it got very close to Portland harbour, which appeared to be its destination. I was waiting to intercept it, but, I lost contact with it. It was as if it vanished. I know that one never sees ships in the harbour, or entering or leaving harbours, so I wondered what happens to ships like the one in this case? Do they just vanish?

Dunno if this applies to the campaign part of the game but when you create missions with the editor you can set waypoints for every unit. If you access the properties of these units there is a checkbox that says something like "delete on last waypoint".

So I guess in your case the ship actually made it to its destination and has been removed from the "world". So to prevent this from happening you should do what BdU keeps telling you : "Be more agressive!" :D :D :D

Yes, the merchant was set to 'delete on last waypoint'.