China’s worse that Suez ship congestion set to widen global trade chaos

The global shipping industry, already exhausted by pandemic shocks that are adding to inflation pressures and delivery delays, faces the biggest test of its stamina yet.

When one of China’s busiest ports announced it wouldn’t accept new export containers in late-May because of a Covid-19 outbreak, it was supposed to be up and running again in a few days. But as the partial shutdown drags on, it’s further snarling trade routes and lifting record freight prices even higher.

Yantian Port now says it will be back to normal by the end of June, but just as it took several weeks for ship schedules and supply chains to recover from the vessel blocking the Suez Canal in March, it may take months for the cargo backlog in southern China to clear while the fallout ripples to ports worldwide.

The trend is worrying, and unceasing congestion is becoming a global problem,” A.P. Moller-Maersk A/S, the world’s No. 1 container carrier, said in a statement Thursday.

The situation in South China is another “in a string of disasters we’ve seen plague the global supply chain,” according to Nerijus Poskus, vice president of ocean strategy and carrier development for Flexport Inc., which makes software that helps companies manage their supply chains.

He estimated the congestion in Yantian will take six to eight weeks to clear.

That timetable is a problem because it extends the disruptions into the late-summer period of peak demand from the U.S. and Europe, where retailers and other importers restock warehouses ahead of the year-end holiday shopping rush.

Usually cheap and invisible to companies and consumers, ocean freight that’s now more expensive than ever has become a double-edged threat to the world economy: by acting as both a drag on commerce and a potential accelerant for inflation. In the U.S. on Wednesday, Federal Reserve policy makers raised their inflation forecasts partly because bottlenecks have formed as supply fails to keep pace with demand.

Drewry Shipping data released Thursday showed no let-up as container rates on several routes kept climbing, including an increase to $11,196 for a 40-foot box to Rotterdam from Shanghai. That’s a nearly seven-fold increase from a year ago.

While the situation at the Chinese port is improving, on Wednesday there was still an average waiting time of 16 days, according to a separate statement from Copenhagen-based Maersk, which is diverting most of its ships elsewhere in June.

But the rerouting by Maersk and other companies will likely only add to the congestion and delays at nearby ports, the statement said.

Some retailers in the U.S. have started informing customers looking to buy new furniture made in China that delivery could take as long as 10 months even if they place an order now, according to Steve Kranig, director of logistics at IM-EX Global Inc. The port congestion in Guangzhou and Shenzhen has also affected assemblers in Southeast Asia, who import raw materials to make armchairs and tables for export to the U.S., he said.

 

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