China shipping delays set to worsen global trade chaos
BEIJING : The global shipping industry, already exhausted by pandemic shocks that are adding to inflation pressures and delivery delays, faces the biggest test of its stamina yet.
When one of China’s busiest ports announced it would not accept new export containers late last month because of a Covid-19 outbreak, it was supposed to be up and running again in a few days. But as the partial shutdown drags on, it is further snarling trade routes and lifting record freight prices even higher.
Yantian Port now says it will be back to normal by the end of this month, but just as it took several weeks for ship schedules and supply chains to recover from the vessel blocking the Suez Canal in March, it may take months for the cargo backlog in southern China to clear while the fallout ripples to ports worldwide.
“The trend is worrying, and unceasing congestion is becoming a global problem,” A.P. Moller-Maersk, the world’s No. 1 container carrier, said in a statement on Thursday.
The situation in South China is another “in a string of disasters we’ve seen plague the global supply chain”, according to Mr Nerijus Poskus, vice-president of ocean strategy and carrier development for Flexport, which makes software that helps companies manage their supply chains.
He estimated the congestion in Yantian will take six to eight weeks to clear.
That timetable is a problem because it extends the disruptions into the late-summer period of peak demand from the United States and Europe, where retailers and other importers restock warehouses ahead of the year-end holiday shopping rush.
Usually cheap and invisible to companies and consumers, ocean freight that is now more expensive than ever has become a double-edged threat to the world economy: by acting as both a drag on commerce and a potential accelerant for inflation.
In the US on Wednesday, Federal Reserve policymakers raised their inflation forecasts partly because bottlenecks have formed as supply fails to keep pace with demand.
Drewry Shipping data released on Thursday showed no let-up as container rates on several routes kept climbing, including an increase to US$11,196 (S$15,000) for a 40-foot box to Rotterdam from Shanghai. That is an increase of nearly seven times from a year ago.
While the situation at the Chinese port is improving, on Wednesday there was still an average waiting time of 16 days, according to a separate statement from Copenhagen-based Maersk, which is diverting most of its ships elsewhere this month.CONCERN OVER CONGESTION
The trend is worrying, and unceasing congestion is becoming a global problem.
A.P. MOLLER-MAERSK,the world’s No. 1 container carrier, on damaging supply chain events.
But the rerouting by Maersk and other companies will likely only add to the congestion and delays at nearby ports, the statement said.
Even without the Suez blockage or port backlogs, the global transportation system would probably still be struggling with maxed-out capacity. Exports from China and other Asian nations are at record highs, as US and European economies reopen and other markets such as India buy medical goods to help with their ongoing coronavirus outbreaks.
China’s trade boom shows no sign of letting up, with exports the third largest on record last month and the third and fourth quarters usually the biggest periods for trade in any given year.
“There are still a number of problem spots that will pose challenges to global trade and logistics activities in the second half of 2021,” according to Mr Nick Marro, lead analyst for global trade at the Economist Intelligence Unit in Hong Kong.
“The biggest risk will be recurring Covid-19 outbreaks, which we can probably see as inevitable owing to the new variants, but this will also include mismatched supply and demand for container space and existing logistical bottlenecks in major Western ports.”
Some of the goods that could not leave China through Yantian were diverted to other nearby terminals, such as the one run by Guangzhou Port. That has caused periodic delays there, although the congestion has eased a lot, a worker who gave only a family name of Lin said on Thursday.
Even so, that has not been enough to make up for the disruptions at Yantian, which may have affected the equivalent of about one million 20-foot containers so far, according to Bimco chief shipping analyst Peter Sand. Yantian handles about 13 million a year.
“Adding another disruption on top of the current state of emergency is obviously making a stretched supply chain even more fragile,” he said.
There are currently 139 container vessels anchored off the coast of China, about 50 per cent more than the average from mid-April to early May, according to Bloomberg analysis of vessel data.
Some goods have stopped shipping altogether. Mr Chong Junxiong owns a clothing firm called Genesis Group in Singapore, and contracts production to a manufacturer in Dongguan, near Shenzhen. Not only has his supplier been shuttered due to Covid-19, but he cannot get any deliveries as shipments have also halted.
“There are bottlenecks in ports all over the world because of Covid-19 outbreaks – people are not going to work in the same numbers and aren’t working at the same speed as they did before the pandemic,” said Mr Bjorn Hojgaard, chief executive of Anglo-Eastern Univan Group, a company that manages operations for a fleet of 700 ships globally, including everything from tankers to container ships.
“It’s taking longer for shipping to recover than what was expected a few months ago, but I’m hopeful that, going into the fourth quarter in 2021 and the first quarter in 2022, we will see the resumption of activity in many parts of the global economy, and certainly a normalisation of some of the challenges we face in shipping.”
Source : Strait Times