COVID inhibits biting in Chinese ports and threatens global supply chains

© . FILE PHOTO: A cargo ship carrying containers is seen near the Yantian Port in Shenzhen, following the outbreak of the novel coronavirus (COVID-19), in China’s Guangdong province, May 17, 2020. REUTERS/Martin Pollard By Joe Brock SINGAPORE () – Container ship queues outside major Chinese ports are getting longer by the day as COVID-19 outbreaks at manufacturing export hubs threaten to unleash another wave of global supply chain shocks, ship owners, logistics companies and analysts say . China is experiencing the largest spike in COVID-19 infections since an initial outbreak in the central city of Wuhan was contained in early 2020. The spread of the highly contagious Omicron variant this month has led to movement controls across China, including in key manufacturing hubs of Shenzhen and Dongguan, paralyzing factories making goods from flash drives to auto parts. As China’s main ports remain open and ships continue to dock, congestion is increasing and some container ships are changing to avoid expected delays, shipowners, analysts and supply chain managers said. Charter rates are expected to rise as cargo shipping delays lengthen, they said. Container ship congestion continues to build on China’s major manufacturing hubs as the number of COVID cases rises at its largest container terminal as dockers, truck drivers and factory workers stayed at home, said Jasmine Wall, Asia-Pacific manager at SEKO Logistics. “This means that it will be difficult to get cargo to and from the ports and so whether the terminals are open or not will be a moot point,” said Lars Jensen, CEO at Vespucci Maritime, a container shipping consultant. “It will have a disruptive impact on the supply chain – and in turn prolong the current supply chain crisis.” Currently, 34 ships are waiting to dock off the coast of Shenzhen, compared to an average of seven a year ago, according to Refinitiv ship tracking data. In Qingdao, an eastern Chinese port city, about 30 ships are waiting to dock, compared to an average of 7. Charter rates per 40-foot container remain close to all-time highs on major global shipping routes, worth about $16,000 on the China-US West Coast Route and nearly $13,000 from China to Europe, according to the Freightos Ship Index. Major global container rates remain near all-time highs on major routes third of capacity, leading to greater disruption to global shipping than that caused by the six-day closure of the Suez Canal last year after the closure of the Suez Canal. Ever Given container ship ran aground, a director of Maersk, the world’s largest container ship, noted last year. Although supply chain experts say Chinese ports are now more resilient to staff shortages and transport disruptions, fears remain that Yantian may be should close as infections and restrictions spread. According to JP Morgan Global PMI, while still high, supplier and shipping delays had declined to the lowest level since early 2021 in February. “If the (Yantian) port closes, the whiplash effect on reopening will destroy all progress in the US,” said Bjorn Vang Jensen, vice president at consultancy Sea-Intelligence. Even if ocean freight terminals remain open, the lack of truck drivers and warehouse managers means there will be delays in filling sea containers and getting them to port. Container ship congestion is building from China’s major export hubs as COVID restrictions bite ​​/akvezxkrgpr/ChinaContainerPortCongestionMarch162022.png INFLATION As other nearby export hubs also face bottlenecks, including Hong Kong and Shanghai, ships may have to wait for congestion to ease to load cargo, meaning phones, televisions and toys will take longer to reach the United States, said Peter Sand, chief analyst at Xeneta, a freight analytics firm. “I expect consumers in the US and shippers with freight to North America will be the hardest hit,” said Sand. said. Shipping companies are also facing the possibility of a rapid escalation of Omicron variant COVID cases in China, as seen elsewhere in the world, which could lead to more widespread disruptions and impact on already soaring global inflation. “The zero-tolerance policy of the Chinese authorities seems to indicate that there is a high possibility of further closures,” said Niels Rasmussen, Chief Shipping Analyst at BIMCO, an association of shipowners. “A slowdown in Chinese exports will exacerbate supply chain delays and corporate inventory, which could lead to further price increases.”

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