China Delays and Shipping Logistics for 2021 Q4

Last week China shut down a key terminal at is Ningbo-Zhoushan port, the third busiest port in the world, after one worker was found to be infected by Covid. This move will likely put further pressure on an already stretched supply network. China has implemented a “zero tolerance” approach towards Covid, some warn that this may not be the last closure at a port as long as Beijing continues to take this stance.

The latest wave of port congestion in eastern China could further drive up container shipping rates, which recently topped $20,000 per 40-foot box for the first time on the critical China-U.S. route as rising retailer orders ahead of the peak U.S. shopping season added strain to global supply chains

Foreign demand for Chinese-made products has remained strong — both by companies’ accounts and official data. The customs agency said in the first half of the year, exports to the European Union rose 35.9% from a year ago to $233 billion, while those to the U.S. climbed 42.6% to $252.86 billion.

From the Suez Canal congestion in March to the re-emergence of Covid cases around a major Chinese export hub in Guangzhou in June, logistical disruptions have hit global trade one after the other. Many goods can’t be shipped out, said Fang Xueyu, vice president of international marketing and general manager for Asia-Pacific at Chinese home appliance company Hisense.

“Inventory levels will be retailers’ primary concern as they are faced with the decision to either have limited or no stock of certain items or manage higher costs associated with air shipping good instead” said Dawn Tiura CEO, Sourcing Industry Group. She also added “container capacity will likely get more expensive, and shippers will likely pass costs on to consumers, heating up global inflation further ahead of the key holiday season”

Marro from the EIU also pointed to disruptions which will be compounded by key demand ahead of the holiday season. “Interruptions to trade not only pose problems for shipping and consumers, but also manufacturers who rely on critical imported components,” he said.

A cargo ship carrying containers is seen near the Yantian port in Shenzhen, Guangdong province, China, where congestion may take six to eight weeks to clear, according to some analysts [File: Martin Pollard/Reuters]