Yantian Effect’ Could Cause Shortage of Goods as Freight Rates Set to Stay High

SHENZHEN : Chronic congestion in Asia, particularly at Yantian, the US and Europe will force rates higher and will most likely lead to shortages of low-value goods no longer viable to transport, according to a senior European banker.

Yantian productivity, while on the increase, will see the backlog of cargo that has mushroomed take some months to clear.

And at the southern Chinese port complex that includes Shenzhen, Chiwan, Shekou and Nansha, productivity fell as a result of the shortage of staff at Yantian and other terminals caused by regional Covid infections.

While Yantian was the hardest-hit, the diversion of vessels to neighbouring ports is also affecting the efficient handling of freight in the region, as Nansha and Shekou see overflow cargo from Yantian heading their way.

Even with the increase in activity at Yantian, as port staff return to work, consultancy MSI’s monthly report stresses that “while the situation in Yantian itself is improving… as with Suez the real impact may be felt in the weeks ahead”.

Effectively, the disruption of sailing schedules and cancelled port calls will see a failure to efficiently “circulate equipment”, says the monthly Horizon report, leading to “de facto blanked sailings at a time when demand is expected to increase”.

In its service update yesterday, Maersk said that 11 of its 19 services would not call at Yantian this month, while a further four would continue with ad hoc omissions of the port.

Major delays at Yantian have seen other carriers, including Hapag-Lloyd, Ocean Network Express and MSC, shift service calls to Nansha in an effort to maintain some service schedule integrity.

According to data company project44, if Chinese authorities extend Covid restrictions, high daily blank sailing rates could extend into July, “snarling supply chains well into the summer”.

The company added that its seven-day average of median dwell times for export boxes doubled, to over 23 days, by 15 June.

Josh Brazil, VP of marketing at project44, advised shippers with a China focus “to get full visibility into your shipments, look for alternative ports and do everything you can to get ahead of this event, because it has the potential to create massive headaches across the global economy”.

That could be good news for the carriers, but will mean further anguish for shippers forced to increase their prices to cover the rises in transport costs. And consumers will see inflation increase; it is already at around 2-3% in Europe, said the banker, who preferred to remain anonymous.

Demand is forecast to grow by around 6% this year and, even if there is some slowdown in growth next year, it is expected that high rates will be maintained.

“Growth is unlikely to slow until 2023 or 2024, when the new vessel orders are expected to be delivered. It has been a super-cycle of unexpected, unforecastable events,” added the financier.

Source : gCaptain