China’s port shutdown raises concern for shape of shipping
A covid-19 outbreak that has partially shut one of the world’s busiest container ports is heightening concerns that the rapid spread of the delta variant will lead to a repeat of last year’s shipping nightmares.
The Port of Los Angeles, which saw its volumes dip because of a June covid outbreak at the Yantian port in China, is bracing for another potential decline because of the latest shutdown at the Ningbo-Zhoushan port in China, a spokesman said. Anton Posner, chief executive officer of supply-chain management company Mercury Resources, said that many companies chartering ships are already adding covid contract clauses as insurance so they won’t have to pay for stranded ships.
It seemed as if things were just starting to calm down, “and we’re now into delta delays,” Emmanouil Xidias, partner at Ifchor North America, said in a phone interview. “You’re going to have a secondary hit.”
The shutdown of the Meishan terminal at NingboZhoushan is raising fears that ports around the world will soon face the same kind of outbreaks and Covid restrictions that slowed the flows of everything from perishable food to electronics last year as the pandemic took hold. Infections are threatening to spread at docks just as the world’s shipping system is already struggling to handle unprecedented demand with economies reopening and manufacturing picking up.
The shutdown in June of the Yantian port in Shenzhen led to a backup of goods in factories and storage yards and also likely lifted soaring freight rates, which are at record levels and a source of inflation.
The closed Meishan terminal accounts for about 25% of container cargo through the port, calculates security consultant GardaWorld, which said “the suspension could severely impact cargo handling and shipping.” Germany’s Hapag-Lloyd said there will be a delay in sailings.
The port was the third busiest globally in terms of container shipments in 2020 and the second busiest in China after Shanghai, according to maritime publication Lloyd’s List.
An extended shuttering at Ningbo-Zhoushan could be especially painful for the world economy because seaborne trade usually rises toward the end of the year as companies ship Christmas and holiday products.
“There may be far-reaching downstream consequences going into Black Friday and holiday shopping seasons” and the next 24 hours will determine whether there is a large outbreak or not, said Josh Brazil, vice president of marketing at Project44, a supply-chain intelligence firm. “One of the few givens in 2021 is endemic delays, and the fact that conditions can change almost overnight.”
Container prices have soared, with the benchmark cost of shipping a container from Shanghai to Los Angeles is up more than 220% over the past year to $10,322 this week.