Chaos began to unfold last month when authorities in southern China’s Guangdong Province – home to some of the world’s busiest container ports – canceled flights, locked down communities and suspended the trade along its coastline to bring a rapid spike in Covid-19 cases under control. .
The infection rate has since improved and many operations have restarted.
But the damage has been done. Yantian, a port about 50 miles north of Hong Kong that handles cargo that would fill 36,000 20-foot containers every day, was closed for nearly a week late last month after infections were discovered among dockers. Although it has reopened, the port is still operating below capacity, creating a huge backlog of containers awaiting departure and ships awaiting docking.
The congestion in Yantian has spread to other container ports in Guangdong, including Shekou, Chiwan and Nansha. All are located in either Shenzhen or Guangzhou, the fourth and fifth largest container ports in the world. The domino effect creates a huge problem for the global shipping industry.
Yantian’s backlog “adds further disruption to an already stressed global supply chain, including the significant maritime portion of it,” said Peter Sand, chief shipping analyst for Bimco, an association of shipowners. People “may not find everything they were looking for on the shelves when shopping for Christmas presents later in the year,” he added.
More than 50 container ships were waiting to dock in Guangdong’s Outer Pearl River Delta on Thursday, according to Refinitiv. The data. This is the largest order book since 2019.
Yantian Port operations have returned to about 70% of normal levels. But he doesn’t expect to regain full capacity until the end of June.
Increased shipping costs
Congestion in southern China has led major shipping companies to warn customers of delays, changes in ship routes and destinations, and fee increases.
While the company has said it will divert some carriers to other ports, that won’t necessarily solve the problem. Maersk warned that wait times at places like other ports in Shenzhen, Guangzhou and Hong Kong could increase as more ships arrive.
It’s a global trend. Fares for eight major east-west routes have all increased from the same period a year ago, according to London-based Drewry Shipping. The biggest price hike came along the route from Shanghai to Rotterdam in the Netherlands, which climbed 534% a year ago to over $ 11,000 for a 40-foot container.
Average container freight rates from China to Europe, meanwhile, recently hit $ 11,352.33, the highest level since at least 2017, according to Refinitiv.
Guangdong crisis deepens pressure on already tense country global industry.
In the United States, for example, major ports on the California coast are already crowded with container ships, compounding the country’s bottleneck. largest trade gateway with Asia.
“On the contrary, resolving the backlog initiated as a result of the Yantian terminal congestion could take months, as the onset of peak season will mean demand will only increase,” he said. .
A delicate balance
Guangdong crisis shows how fragile the global supply chain is is, according to Pawan Joshi, executive vice president of E2open, a Texas-based supply chain software provider.
“There is no more room for mistakes or unexpected events – everything is kicked out,” he said. “It means you can’t afford a single mistake because there is no more buffer.”
The pandemic took its toll last year as closures temporarily closed factories and disrupted the normal flow of trade. As economies come back to life, suppliers have been strained by a resumption of manufacturing and additional consumer demand.
But this increase in demand is hampered by almost unchanged capacity in container transport. The reduction in global air cargo capacity due to the collapse of long-haul aviation has made matters worse.
“With sustained strong demand for shipping around the world, we will continue to see shipping constrained with higher than normal rates and larger than usual cargo rollovers,” Joshi said, referencing what happens when a shipment needs to be booked for future travel because it cannot be loaded onto its home ship.
Demand is likely to change somewhat as countries relax Covid-19 restrictions and people start spending less on home appliances and other goods and more on outdoor experiences. But the constraints on the global supply chain are unlikely to disappear anytime soon.
“More recently, we have seen prolonged fatigue in the global supply chain adding to already existing challenges,” said Sand of Bimco, adding that the tensions will likely continue to be felt “for up to a year”.