Ports, shipping firms and governments in China are working to get marine transport back on an even keel as Covid-19 outbreaks continue to snarl port operations and traffic at sea.
A small virus cluster involving a handful of asymptomatic port operators at Shenzhen’s Yantian container port forced cadres in charge of one of southern China’s most hectic shipping hubs to lock down berths, isolate staff and slash services to barebones operations for more than a month.
Cascading delivery delays and cancelations have hit exporters and forwarding agents in China hard since May 21, when infections popped up at Yantian as these stakeholders were already facing headwind. Previous waves of cases in the West and longer turnarounds of crews, vessels and containers from there have already worked their way up supply chains and affected China’s trade.
It took Shenzhen more than 30 days to reopen its Yantian Port on June 24 after repeated mass testing of staff yielded no fresh cases. Now, Yantian is still in a slow “destocking” process as containers waiting to be shipped to the West still “assume mountainous dimensions.”
The process could last into the first seven to 10 days of July, the traditional bumper period for business, according to a June 30 note seen by Asia Times from China Merchants Port Holdings, a state-owned firm that manages Yantian.
The Shenzhen Special Zone Daily and other papers in the city reported that the 30-plus days of de-facto port lockdown at Yantian saw the price of shipping a standard twenty-foot equivalent unit (TEU) to ports along the west coast of the United States such as Los Angeles rocket to the peak of US$7,000 in early June and US$12,000 for routes to the east coast.
Exporters are still scrambling to make detours via Guangzhou, Shanghai and Ningbo to ship goods like IKEA furniture and electronic gadgets from plants across southern China.
The eastern port city of Ningbo, which handled more than 31 million TEUs in 2020 and was ranked only after Shanghai and Singapore globally, has seen a sudden spike in ship bookings since June when Yantian was still closed, yet there was little additional space available when Ningbo factories also sought slots on vessels amid the robust demand from the West.
The logjam of trucks clogging major expressways leading to Ningbo’s ports also caught Beijing’s attention. Premier Li Keqiang flew in at the end of May to discuss ways to ease the gridlock.
Li was told by representatives of major forwarder and shipping agencies from Ningbo and Shenzhen that the closure of Yantian terminals piled extra pressure but the perennial shortage of containers had been worsening for nearly a year.
Xinhua reported that Li convened a meeting in Ningbo attended by Transport Minister Li Xiaopeng and the director of the State Council’s National Development and Reform Commission, He Lifeng.
The Premier warned that numerous manufacturers may have profits reduced by the chaos at sea and ports if their goods could not be shipped to overseas buyers in time and that shipping must not jam the gears of China’s economic rebound.
Soon state-owned shipping operators like China Shipping and COSCO were reportedly told to dispatch their vessels to American and European ports, where processing and turnaround have been slowed by the pandemic, to haul empty containers back to Shanghai and Ningbo.
COSCO president and party chief Han Jun told Xinhua it was the firm’s “bounden duty” to alleviate the supply chain problem facing Chinese exporters. He assured that all extra costs would be absorbed by streamlined handling and internal cost-saving measures and would not be passed down to its clients.
Yet Han said that the imbalance had its roots in China’s trading position as it exported far more goods than it bought. COSCO fleets and containers bound for the West would always be stuffed full yet little profit could be made when shipping goods the other way.
Wu Bingqing, the China branch chief of Maersk, the world’s largest container shipping line and vessel operator, said the company had been moving more containers through ports in mainland China than any other market since the final quarter of 2020 and one in every three containers it shipped originated from China.
Beijing is also nudging other SOEs to help tide over Chinese exports, with production of new containers being ramped up.
Beijing-based Lifeweek Magazine, which publishes under the umbrella of the China Publishing Group, revealed last month that China International Marine Containers Group (CIMC) had been facing pressure to churn out more containers but it had been boxed in by constraints such as surges in prices of raw materials like steel.
Swift delivery of new containers to ports and exporters was also held back by logistical issues as they must first go overland from major production bases in inland provinces.
“We have to work hard to speed up our production now, way quicker than we had expected to have right out of the box back in 2019 and 2020, when initially oversupply plagued the market amid the US-China trade war and then the pandemic,” said CIMC CEO Mai Boliang.
“But almost overnight we have to rejig schedules to make as many containers as we can but demand is outstripping our capacity.” The company, with a 40% share of the global market, sold 450,800 TEUs in the first quarter, up 174%, according to its stock exchange filing.
Strong demand is giving crucial buoyancy after CIMC sank into the red in the first half of 2020 but Mai warned that the container crunch was structural and CIMC alone could not address the imbalance if more of its new boxes got held up at American ports as the container dislocation persists.
Calls are thus been made for Beijing and Washington to work out a joint plan during Deputy Premier Liu He’s next talk with US Trade Representative Katharine Tai, for traders and shipping firms on both ends to work collaboratively to feed containers and capacity back and forth between the world’s two largest trading partners.