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The covert appearance at the Chinese port exacerbates delays in the global supply chain

The outages in one of the world’s largest container terminals in southern China have caused tremendous tension for weeks in the already extended global shipping industry, and supply chain delays for manufacturers and retailers around the world have skewed.

Yantian terminal Shenzhen closed for almost a week after port staff tested positive for Covid-19 in late May; A few weeks later, productivity returned to about 70 percent of normal levels.

Yantian handles 13-foot 20-foot vessels a year, making it the third largest terminal in the world. But the congestion at the Hong Kong-based Hutchison Ports-managed facility has spilled over to other nearby terminals, such as Nansha and Shekou. Local authorities in the region blocked roads and closed some business sites in an attempt to stop the spread of the virus.

The situation leaves the vulnerability of global shipments facing future delays, even with relatively small outbreaks in Chinese port cities. Lars Jensen, CEO of Vespucci Maritime Consulting, said the incident revealed the risk of an even more disastrous closure if the virus hit larger ports like Shanghai.

“Chinese authorities are trying hard to deal with the smallest outbreaks. . . Only a few cases are needed to close large areas. We could see much bigger impacts, ”he said.

At the height of the break, Guangzhou-based clothing factory owner Leslie Wang told the Financial Times that the situation was “like a nightmare.”

Although he tested the virus on all his employees and kept the production lines running, “the goods have piled up in the merchandise company and cannot be shipped in any way,” he said earlier this month.

Ocean shipping has been under tremendous stress since the end of last year due to pandemic-related controls, such as border restrictions, which have led to a shortage of empty containers. The Suez Canal blockade worsened in March and caused further delays.

Shipping companies are also struggling to continue to increase demand for their services after the pandemic sparked growth in online shopping and advanced economies as they recovered from last year’s historic recession.

As a result, the cost of shipping a 40-meter container on its journey to North Europe exceeded $ 11,000 for the first time, about $ 8,500 in mid-May and $ 2,000 last October, according to Freightos.

Although Rolf Habben Jansen, CEO of Hapag-Lloyd, said, “I’d like to think we’ve got the worst behind us,” he warned, “We didn’t even see Yantian and there were other surprises in the last three quarters.”

Yantian’s disruptions and the impact on shipping costs could add to global inflationary pressures, as some economists warned when the outbreak first hit. This raises concerns that a rise in factory prices in China, driven by a commodity rally, will drive up export prices.

But China chief economist Larry Hu Macquarie of the Group said that overall, Chinese exports helped reduce the rate of price growth. “China’s share of world exports has arrived [a] a new one to meet global demand for goods and to limit limited production elsewhere, “he said.” Otherwise, global inflationary pressures could be even greater. ”

Peter Sand, Bimco’s chief shipping analyst, says he doesn’t think “freight rates put wood in [inflation] fire”.

In an effort to work around the stoppage, shipping companies have been diverting hundreds of vessels to other ports and several ships are skipping southern China to avoid delays. The average wait for ships entering the terminal was 16 days, according to Maersk, the world’s largest container transport company.

Global Reliability Schedule Line Chart (% of Time) Pandemics cause long delivery delays

Eaton electrical systems maker has 25 containers in southern China, according to Klaus Gaeb, vice president of the European supply chain. As a result, the company will have to wait two more weeks to receive supplies. After that, it was a two-to-three-month wait that had to rearrange the 45-container items because the original goods were stuck in the Suez Canal blockade.

Carriers have been looking for alternatives such as air and rail to transport goods from Asia to Europe, but these options are becoming increasingly difficult. Gaeb said prices for transporting goods across Eurasia have doubled from the previous pandemic levels to $ 36,000 per truck.

The delays will continue for manufacturers and retailers around the world throughout the year, as they will limit the availability of cargo vessels and indicate high freight rates, according to data from the shipping industry.

Otto Schacht, executive vice president of maritime logistics at Kuehne + Nagel, one of the world’s largest carriers, said the timing of the last hiatus was particularly unfortunate as merchants are close to entering the peak season with return-to-school and end-of-year shopping.

“How quickly have we returned to Covid’s previous supply chain reliability? Probably six to nine months,” he said.

Jensen of Vespucci Maritime said Yant’s delay “serves to push the point of time into the future when we return to normalcy.”

“There is a high risk that the return point will be pushed to 2022,” he warned.

Additional reports by Wang Xueqiao in Shanghai, Qianer Liu in Shenzhen and Patricia Nilsson in London

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