A sore throat in a Chinese port is exacerbating global supply delays

The weeks of downtime at one of the world’s largest container terminals in southern China have put a huge strain on the already stretched global shipping industry, exacerbating supply chain delays for manufacturers and retailers around the world.

Yantyan Terminal in Shenzhen closed for almost a week after a positive test of Covid-19 by port workers in late May; Weeks later, productivity returned to just about 70 percent of normal levels.

Yantian handles 13m20-foot containers a year, making it the third largest terminal in the world. However, the congestion of the facility operated by Hutchison Ports, headquartered in Hong Kong, has been diverted to other nearby terminals, such as Nansha և Shekou. The local authorities of the region have closed the roads, closed some business zones, trying to stop the spread of the virus.

The situation reveals the vulnerability of global cargo to further delays, even if relatively minor outbreaks occur in Chinese port cities. Varspucci Maritime CEO Lars Jensen says the incident shows an even more catastrophic risk if the virus hits larger ports such as Shanghai.

“The Chinese authorities are trying hard to fight the smallest outbreaks. Only a few individual cases are needed to close large areas. “We could have seen a lot more impact,” he said.

At the height of the downturn, Leslie Wang, owner of a garment factory in Guangzhou, told the Financial Times that the situation was “like a nightmare.”

Although he tested all his employees to detect the virus, continued to operate the production lines, “the goods have accumulated in the shipping company, it is not possible to deliver at all,” he said earlier this month.

Since the end of last year, ocean freight has been under tremendous stress as epidemic controls, such as border restrictions, have led to a shortage of empty containers. The situation worsened in March with the blockade of the Suez Canal, which led to further delays.

Freight companies are also struggling to keep up with the growing demand for their services after the epidemic boosted the growth of online shopping as developed economies recover from last year’s historic decline.

As a result, the cost of shipping a 40-foot container to Asia to Northern Europe recently exceeded $ 11,000 for the first time, from about $ 8,500 in mid-May to $ 2,000 last October, according to Freightos.

Although Hapag-Lloyd CEO Rolf Habben Jansen said, “I would like to think we had the worst of us,” he warned that “we did not see Yantia coming either, there were other surprises in the last two quarters.”

The Yantian disruption and its impact on freight costs could increase global inflationary pressures, some economists warned when the outbreak first began. This added to fears that rising factory prices in China could lead to higher export prices as a result of the product rally.

But Larqu Hoon, chief economist at Macquarie Group’s China, says Chinese exports as a whole are helping keep prices up. “China’s share of world exports has reached [a] “A new high level in response to rising demand for goods in other restricted areas of production around the world,” he said. “Otherwise, global inflationary pressures could be even higher.”

Peter Sand, Bimco’s chief shipping analyst, said he did not think “shipping prices put wood on wood” [inflation] fire. “

Cargo companies are moving hundreds of ships to other ports to deal with the disruptions, and some ships are bypassing southern China to catch up. The average waiting time for ships to enter the terminal has reached 16 days, according to Maersk, the world’s largest container shipping company.

The epidemic, which shows a line chart of the Global Reliability Schedule (% in time), has caused massive delivery delays.

According to Klaus Gaeb, vice president of supply chain in Europe, Eaton, a manufacturer of electrical systems, has 25 containers stored in southern China. As a result, the company has to wait an additional two weeks to receive the supplies. This was followed by a two- to three-month wait for two of the 45 containers to be rearranged as the original products were stuck during the blockade of the Suez Canal.

Freighters were looking for alternatives, such as air and rail, to transport goods from Asia to Europe, but pursuing these options has become more difficult. Gaeb says shipping costs in Eurasia have more than doubled, from pre-epidemic levels to $ 36,000 per truck.

Delays will continue throughout the year for manufacturers and retailers around the world, such as limited cargo ship availability and record high freight rates.

Otto Shakht, executive vice president of maritime logistics at Kuehne + Nagel, one of the world’s largest carriers, said the latest downturn was particularly painful as shipments approached the peak season, when retail sales returned to the գնումschool գնում year-end.

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

Jensen of Vespucci Maritime says that the balance with Yanti “serves as a point of time to push into the future when we return to normalcy.”

“There is a significant risk that we will push back to 2022,” he warned.

Additional report by Wang Suejiao of Shanghai, Qianer Liu in Shenzhen Պ Patricia Nilsson of London

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