The COVID-19 pandemic in southern China blocked ports critical to international trade, causing a shipping backlog that could last some months to clear, leading to shortages during the shopping season of the year-end holiday. The chaos started unfolding last month when officials in Guangdong, the southern Chinese province – the home to some of the busiest ports of the world – suspended trade activities, canceled flight operations, and locked down communities along its shoreline to bring an instant spike in coronavirus cases under control.
At the moment, the rate of new infections improved, and several operations resumed. However, the backlog caused the damage. Yantian, a port of around fifty miles north of Hong Kong which handles goods that would fill thirty-six thousand twenty-foot containers daily, was shut down for approximately seven days late last month after COVID-19 infections found among dock workforces. In addition, it resumed operation, and the port is still operating below capacity, creating a massive backlog of big containers waiting to leave and ships waiting to dock.
Congestion in Yantian Port Spilled over to Other Guangdong Container Ports
The congestion in Yantian port spilled over to other container ports in Guangdong, including Nansha, Shekou, and Chiwan. All of them located either in Guangzhou or Shenzhen, the fifth and fourth-largest inclusive container ports globally. The domino effect is generating a huge issue for the shipping industry of the world. Moreover, the Yantian backlog is adding further disruption on an already stressed-out international supply chain, including the important seaborne leg of it, according to chief shipping analyst for Bimco, Peter Sand.
According to Refinitiv statistics, over fifty container vessels were waiting in Guangdong’s Outer Pearl River Delta to dock as of Thursday. That was the biggest backlog since 2019. Furthermore, the obstacle in operations in Yantian is concerning. The port was not able to handle around three lack fifty-seven thousand twenty-foot container loads since late May, according to a recent estimation by Danish consultancy Vespucci Maritime’s CEO, Lars Jensen. Yantian port operations recovered to around seventy percent of normal levels. However, it is not expecting to return to complete capacity until June end.
Surging Shipping Costs in southern China
The congestion in southern China backlog led top shipping firms to warn clients of delays, changes to vessel paths, and spikes in fees. The largest container shipping line & vessel operator, Maersk, told clients last week that ships could delayed at Yantian for at least sixteen days. Whereas the firm said it would divert some carriers to alternate ports, that won’t necessarily resolve the issue.
Maersk suggested that the waiting time in places such as other ports in Hong Kong, Shenzhen, and Guangzhou could increase as even more ships flood in. Shipping giants such as Cosco Shipping, Hapag-Lloyd and MSC, all have increased freight rates for cargo between North America and Asia or Europe. Moreover, this month MSC said that it would raise shipping fees from Asia to North America by as much as $3798 per forty-five-foot container.
It is an international trend. According to the statistics of London-based Drewry Shipping, Rates for eight main East-West routes all surged from the same duration one year ago. Moreover, the largest price increase was along the route from Shanghai to Rotterdam in the Netherlands, which climbed five hundred and thirty-four percent from one year ago to over $11000 for a forty-foot container. Meanwhile, average container freight rates from China to Europe recently hit $11352.33, the peak level since at least 2017, according to the data of Refinitiv.
Demand is possibly to shift to some extent as nations loosen coronavirus restrictions. People began spending less on household appliances as well as other products and also more on outdoor experiences again. However, the limitations on the international supply chain are not likely to go away soon.