"One container is hard to find" has an impact on Chinese exporters
In the past year, Steve Chuang's Hong Kong electronics manufacturing company has been enjoying steady demand from the United States and Europe. However, like many Asian exporters, he is working hard to ship his products to customers.
Chuang's company produces electronic products, and it is just one of many companies enjoying trade growth. This wave of trade growth has helped the region's economy recover from the downturn caused by the new crown epidemic last year.
However, the successful recovery and rebound of these companies are being hindered by the disruption of the global shipping supply chain. The surge in China's exports to the West, coupled with the inability of ports to operate normally due to the epidemic in foreign countries, has caused many containers to flow back into the air, causing container ships to line up outside the ports and soaring freight rates. It can be described as "a box is hard to find."
In the past year, the cost of shipping a 40-foot container from China to the United States has more than tripled. Chuang said: "In the past 20 years, we have never seen such a situation... Empty containers cannot be returned to Hong Kong."
China has recovered from the epidemic faster than any other large economy, and its exports of goods, electronic products and medical equipment related to the lockdown have also increased significantly. China’s exports have grown at a double-digit rate for several consecutive months, and the trade surplus hit a record high at the end of last year.
However, at a time when the demand for Chinese goods is rising. Ports in the U.S. and Europe have been subject to epidemic-related restrictions and manpower shortages have caused the delay in returning containers to ports in East Asia.
Roberto Giannetta, chairman of the Hong Kong Liner Shipping Association, said the shortage of truck drivers and warehouse workers in other parts of the world has restricted ports from returning containers to China. "There are still a large number of containers stacked in relatively remote ports, Australia, Eastern Europe, and the central United States," he said. "This is like a perfect storm to prevent containers from returning to Asia."
Hu Haoli, assistant to the chairman of Wenzhou Wanlong Chemical, said freight rates are still high, but this has limited impact on the company because the company sells high-end products.
But for other companies, especially China's large-scale textile industry, the poor return of containers is causing more serious effects. An exporter in Shaoxing, Zhejiang, said that the sharp increase in freight rates in December last year has caused many textile companies to suspend production and shut down.
Executives in the shipping industry once hoped that the suspension of labor unions at factories during the Chinese New Year would slow down production and give shipping companies a respite. But these hopes have been dashed-some Chinese factories require employees to continue to work overtime during the Spring Festival holiday to meet the surge in global demand.
Delays and shortages may push up the price of goods. Chuang said that facing two to four weeks of shipping delays in Hong Kong, his company is negotiating with customers to share the cost, which has increased the price of his products by 2% to 5%.
"One box is hard to find" has an impact on Chinese exportersSo far, the shortage of containers has mainly affected routes departing from Asia, but there are signs that it has begun to affect return routes and hit Chinese import companies. In January, Hong Kong's McDonald's announced that shipping delays had disrupted the supply of hash browns; the peanuts needed for its ice cream sundaes were also in short supply.
Ports are scrambling to find more containers to alleviate the shortage. In January, Ningbo imported about 730,000 TEUs of empty foreign trade containers, a net increase of about 160,000 TEUs compared with the monthly average of the fourth quarter of 2020, an increase of 28%; the number of new imported empty container overtime ships berthed was about 20 times, which was a year-on-year increase. In the fourth quarter of 2020, the monthly average level increased by nearly 62%, effectively alleviating the urgent need for Ningbo's container export to be "difficult to find one container".
John Fossey, director of container equipment and leasing research at Drewry, a marine affairs research and consulting company, said that in the first half of 2020, the output of sea containers fell year-on-year, but the output increased in the second half of the year, and the total output for the year increased by 10%.
But the cost of these new containers will be higher: Fossey said that due to soaring demand and rising costs of raw materials such as steel, the price of new containers delivered this summer is currently about US$6,200, the highest level in history. He warned that this "may cause some companies to postpone ordering containers."
Although some domestic reports show that activity at Chinese ports has improved in recent weeks, some shipping industry insiders remain pessimistic about the prospects for the next few months. Willy Lin, chairman of the Hong Kong Shipper’Council, believes that it will not be "relieved" until summer at the earliest.
Lin Zhaowei (Willy Lin) pointed out that there is an increasing possibility for manufacturers to switch to land trade routes, especially the transport routes from Guangxi Province to Vietnam and to Southeast Asia via trucks. Chuang said that some companies are looking to export to Europe across Russia by land.
At the same time, Asian exporters are stepping up their efforts to obtain shipping space. Roberto Giannetta, chairman of the Hong Kong Liner Shipping Association, said: “Almost every available ship in the world is now in use because there are too many ships docking at the port waiting to be unloaded.”