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Home›Ship Tracking›COVID curbs bite at Chinese ports, threatening global supply chains

COVID curbs bite at Chinese ports, threatening global supply chains

By Zaida B. Hopkins
March 16, 2022
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A cargo ship carrying containers is seen near Yantian port in Shenzhen, following the novel coronavirus disease (COVID-19) outbreak, Guangdong province, China May 17, 2020. REUTERS/Martin Pollard

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  • Container ship congestion increases at Chinese ports
  • COVID-19 curbs keep port, factory and truck workers at home
  • Ripple effect on goods to the United States, inflation

SINGAPORE, March 16 (Reuters) – Queues for container ships outside major Chinese ports are growing longer by the day as COVID-19 outbreaks in manufacturing export hubs threaten to trigger a new wave shocks to the global supply chain, ship owners, logistics companies and analysts say.

China is seeing its biggest spike in COVID-19 infections since an initial outbreak in the central city of Wuhan was contained in early 2020. read more

The spread of the highly infectious variant of Omicron this month has led to movement controls across China, including major manufacturing hubs in Shenzhen and Dongguan, crippling factories making products ranging from USB drives to auto parts. Read more

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As major Chinese ports remain open and ships continue to dock, congestion is building and some container ships are rerouting to avoid expected delays, shipowners, analysts and supply chain officials say .

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

Container ship congestion leans on China’s major manufacturing hubs as COVID cases rise

SUPPLY CHAIN ​​CRISIS

Container loading is “massively declining” at Shenzhen’s Yantian Port, the world’s fourth-largest container terminal, as port workers, truckers and factory workers have stayed at home, said Jasmine Wall, manager Asia-Pacific at SEKO Logistics.

“This implies that it will become difficult to move goods to and from ports and therefore whether or not terminals are open becomes a moot point,” said Lars Jensen, CEO of Vespucci Maritime, a container shipping adviser. .

“This will have a disruptive impact on the supply chain – prolonging the current supply chain crisis.”

Currently, 34 ships off Shenzhen are waiting to dock, up from an average of seven a year ago, according to ship tracking data from Refinitiv. In Qingdao, a port city in eastern China, about 30 ships are waiting to dock, down from an average of seven last year.

Charter rates per 40ft container remain near historic highs on major global shipping routes, trading at around $16,000 on the China-US West Coast route and nearly $13,000 on the China to Europe, according to the Freightos Shipping Index.

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

“HEAVY BLOW EFFECT”

Similar COVID lockdowns last year saw operations in Yantian reduced to a third of capacity, causing greater disruption to global shipping than that caused by the Suez Canal being closed for six days last year after the the grounding of the container ship Ever Given, a director of Maersk, the world’s largest container liner, noted last year

Although supply chain experts say Chinese ports are now more resilient to staff shortages and transport disruptions, there are still concerns that Yantian may have to shut down if infections and restrictions spread.

Supplier and shipment delays, while still high, hit their lowest level since early 2021 in February, according to JP Morgan Global PMI.

“If the port (of Yantian) closes, the whiplash effect when it reopens will undo all the progress made in the United States,” said Bjorn Vang Jensen, vice president of consultancy Sea-Intelligence.

Even though sea freight terminals remain open, the lack of truck drivers and warehouse operators means there will be delays in filling shipping containers and transporting them to the port.

Container ship congestion leans on China’s major export hubs as COVID restrictions bite

INFLATION

With other nearby export hubs also suffering from bottlenecks, including Hong Kong and Shanghai, ships may have to wait for congestion to ease to load their cargo, which means phones, TVs and toys will take longer to get to the United States, said Peter Sand, chief analyst at Xeneta, a freight analytics firm.

“I expect American consumers and shippers of goods bound for North America to be the hardest hit,” Sand said.

Shipping companies are also facing the possibility of a rapid escalation in cases of the COVID variant of Omicron in China, as seen elsewhere in the world, which could lead to more widespread disruption and have implications for global inflation. already on the rise.

“The zero-tolerance policy of the Chinese authorities would seem to indicate a high probability of further closures,” said Niels Rasmussen, chief shipping analyst at BIMCO, a shipping association.

“A slowdown in Chinese exports will aggravate supply chain delays and reduce inventories held by companies, which could lead to further price increases.”

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Reporting by Joe Brock; additional reporting from 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

Our standards: The Thomson Reuters Trust Principles.

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