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COVID curbs bite Chinese ports, threaten global supply chains

FILE PHOTO: Cargo ship carrying containers is seen near Yantian Port in Shenzhen following the outbreak of the novel coronavirus disease (COVID-19) in Guangdong
FILE PHOTO: A cargo ship carrying containers is seen near Yantian port in Shenzhen, following the outbreak of the novel coronavirus disease (COVID-19), Guangdong province, China, May 17, 2020. REUTERS/Martin Pollard

March 16, 2022

By Joe Brock

SINGAPORE (Reuters) – Container ship queues outside major Chinese ports are lengthening by the day as COVID-19 outbreaks in manufacturing export hubs threaten to unleash a new wave of global supply chain shocks, say shipowners, logistics firms and analysts.

China is experiencing the biggest spike in COVID-19 infections since an initial outbreak was contained in downtown Wuhan in early 2020.

The spread of the highly infectious Omicron variant this month has prompted movement controls across China, including in key manufacturing hubs of Shenzhen and Dongguan, shutting down factories manufacturing goods from flash drives to auto parts.

While China’s main ports remain open and ships continue to dock, congestion is occurring and some container ships are being diverted to avoid expected delays, according to shipowners, analysts and supply chain managers.

Charter rates are expected to rise while cargo shipping delays lengthen, they said.

Container ship congestion is stretching China’s key manufacturing hubs as COVID cases surge

SUPPLY CHAIN ​​CRISIS

Container loading at Shenzhen’s Yantian Port, the world’s fourth-busiest container terminal, is “decreasing massively” as dock workers, truck drivers and factory workers stay at home, said Jasmine Wall, Asia Pacific manager at SEKO Logistics.

“This means that it will be difficult to get cargo to and from the ports and therefore it will be debatable whether the terminals are open or not,” said Lars Jensen, CEO of Vespucci Maritime, a container shipping consultant.

“It will be disruptive to the supply chain – prolonging the current supply chain crisis.”

There are currently 34 ships waiting to dock off Shenzhen, compared to an average of seven a year ago, according to Refinitiv ship tracking data. Around 30 ships are waiting to dock in Qingdao, an east China port city, compared to an average of seven last year.

Charter rates per 40-foot container remain near all-time highs on major global shipping lanes, trading at around $16,000 on the west coast route between China and the US and nearly $13,000 from China to Europe, according to the Freightos Shipping Index.

Key global container shipping rates remain near all-time highs on major routes

“WHIPLASH EFFECT”

Similar COVID lockdowns last year saw operations at Yantian reduced to a third of capacity, causing a greater disruption to global shipping than that caused by last year’s six-day Suez Canal closure after the container ship Ever Given ran aground. said a director of Maersk, the world’s largest container ship, last year

Though supply chain experts say Chinese ports are now more resilient to staff shortages and transportation disruptions, fears remain that Yantian may have to close as infections and restrictions spread.

According to JP Morgan Global PMI, supplier and shipment delays, while still elevated, had fallen to their lowest levels since early 2021 in February.

“If the (Yantian) port closes, the whiplash effect of reopening will undo any progress made in the US,” said Bjorn Vang Jensen, vice president of consultancy Sea-Intelligence.

Even if the sea freight terminals remain open, the lack of truck drivers and warehouse clerks leads to delays in loading shipping containers and transporting them to the port.

Container ship congestion is building up off China’s main export hubs as COVID restrictions take hold

INFLATION

With other nearby export hubs also suffering from shortages, including Hong Kong and Shanghai, ships may have to wait until congestion eases to load cargo, meaning phones, TVs and toys are taking longer to get to the United States arrive, said Peter Sand, chief analyst at Xeneta, a cargo analytics firm.

“I expect consumers in the US and shippers shipping to North America to be the hardest hit,” Sand said.

Shipping lines are also grappling with the possibility of a rapid escalation of Omicron-variant COVID cases in China, as seen elsewhere in the world, which could lead to wider disruptions and impact already-rising global inflation.

“The zero-tolerance policy of the Chinese authorities seems to point to a high probability of further lockdowns,” said Niels Rasmussen, chief shipping analyst at BIMCO, an association of shipowners.

“A slowdown in Chinese exports will exacerbate supply chain delays and reduce corporate inventories, which could lead to further price increases.”

(Reporting by Joe Brock; additional reporting by Brenda Goh in Shanghai, Sayantani Ghosh and Kevin Krolicki in Singapore, and Jamie Freed in Sydney; graphics by Gavin Maguire; editing by Simon Cameron-Moore)

https://www.oann.com/covid-curbs-bite-at-chinese-ports-threatening-global-supply-chains/?utm_source=rss&utm_medium=rss&utm_campaign=covid-curbs-bite-at-chinese-ports-threatening-global-supply-chains COVID curbs bite Chinese ports, threaten global supply chains

DUSTIN JONES

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