Shipping lines are skipping ports in China as international orders fall and supply chain problems persist, the Financial Times reports: “Maritime transport affected by weak demand for Chinese goods”
In their article, they report that weaker international demand for Chinese goods has led to a spike in shipment cancellations at the country’s largest ports, dampening the expected economic boost from their rise of zero-covid policies.
Industry participants in China point to an increase in “blank voyages”, where shippers miss ports because there is not enough cargo to pick up or they fear delays, the Financial Times adds.
Noting that cancellations are typical within the industry and typically spike during the lunar new year, supply chain data provider Drewry said the rate is “unusually high” this year due to a drop in demand in the West. China’s exports have fallen for three consecutive months, weakening a central pillar of its struggling economic model, the article clarifies.
They say the cancellation rate for ships traveling east from Asia across the Pacific or to Europe will reach 31% in the coming weeks, compared with 23% in the same period last year and 16% in 2021, Drewry said.
Adding to weak demand, there is less to ship after hundreds of millions of estimated Covid-19 cases over the past month added pressure on the country’s supply chains, prompting staff shortages and factory closures.
“What happened to the shipping market when the virus spread everywhere in China? . . it’s worse than my worst projection,” said Mark Young, chief executive of Shanghai-based Asia Maritime Pacific, which owns a fleet consisting of dozens of ships.
He tells her in the interview that “The market has a lot of empty ships but less cargo ready to be shipped,” he added, comparing the situation to the start of the Covid-19 pandemic in early 2020.
He adds that China’s vast infrastructure connecting factories and ports has grappled for three years with a strict zero-COVID regime that required frequent staff quarantines and “closed-loop” operations. The policy led to delays and cancellations, but exports rose greatly during that period as demand for goods soared.
Separately, Simon Sundboell, founder and chief executive of data provider eeSea, told the FT that the nature of the outage had now changed, from a delay-driven scenario within a “hot market” to one of weaker demand.
“The industry is slowly getting back to normal and more cancellations are necessary due to decreased demand,” he said. “Last year, that was due to all these excessive delays,” the FT mentions.
A Shanghai-based manufacturer who asked to remain anonymous said the carriers “just don’t make it to the ports because there’s no volume.” He added that the drop in demand “is causing shipping companies to reduce the number of ships in circulation,” adds FT.
Jan Dieleman, head of Cargill Ocean Transportation, said the coronavirus outbreak was “absolutely” contributing to a surge in blank travel. The commodity shipping group has not canceled deliveries but has cut coal shipments to China in recent months, partly due to seasonal swings in demand, the article cites.
Young told the FT that Asia Maritime Pacific was forced to cancel a trip to a port on the Changjiang River to pick up steel-related cargo because the factory was unable to produce it on time. He hopes to send another ship to pick it up in a month.
Blank travel has increased globally over the past year against a weak economic backdrop. In China, the first national outbreak of coronavirus coincided with the preparation for the lunar new year. Maersk, the Danish container shipping company, said demand can be “expected to be volatile given the holiday closure in China combined with the Covid situation and ongoing inventory correction in the US and Europe.” the FT.
In parallel, Anne-Sophie Zerlang Karlsen, head of ocean operations for Asia-Pacific at Maersk, suggested, however, that the broader relaxation of Covid-19 measures was “a very positive development that has the potential to boost the economy.” China significantly.”
Finally, Cargill’s Dieleman tells the FT, the shipping industry is now dependent on a rebound in economic activity. “People think that the first wave [of Covid-19] will go away,” he said. “There is going to be a stimulus from the government. So people start to be optimistic.”
Source The Financial Times