China’s Recent COVID Outbreak and the Supply Chain Impact
April 21, 2022
China Section 301 Tariffs Review Process
May 6, 2022
Weekly Vessels Anchored and at Terminals as of 5/02/2022
LA & LB: Anchored 3 (within 40 NM) * | Terminal 29
Oakland: Anchored 2 | Terminal 7 | Drifting 5 Enroute 4
NWSA: Anchored 2 | Terminal 6 | Drifting 0
Vessel Congestion Update
On May 4, 2022, the Southern California Marine Exchange (SCME) reported 89 total ships were in the ports of Los Angeles (LA) and Long Beach (LB). Of the 89 total ships, 32 are container ships including 3 at anchor or loitering and 29 at berth. Beyond 150 NM*, approximately 45 vessels are steaming toward the twin ports.
Since October 25, 2021, the combined decline of on-dock cargo was reportedly down by 44%. The number of ships waiting just outside the ports of LA and LB have been reduced to almost zero, compared to over 100 container vessels earlier this year. This is a positive indicator that port congestion has been easing, however, it is uncertain how long it will continue to improve.
Results From Strict Lockdowns in China
China’s strict lockdown in Shanghai and other cities continue as they battle COVID 19 outbreaks. Some shipping operations have realized slight improvement in Shanghai as factories have gradually restarted; however, containers continue to pile up in China ports due to trucker shortages. Truckers continue to face quarantine and are being blocked from the road by the government. Trucker shortages do not allow finished products to reach the ports and raw materials are not being delivered to factories. It is estimated the congestion in Shanghai has increased by 30-40% as of April 25, 2022. The lockdowns are not limited to Shanghai as other cities are experiencing overall shortages as well, which results in backlogs of goods waiting to be moved within China and worldwide. The zero COVID policy has slowed down Shanghai port’s container unloading as well as domestic production for exports.
The Diplomat reports that hundreds of container ships and bulk ships continue to wait to unload off at the port of Shanghai. Bloomberg, in part, reported, “Bottlenecks have increased supply chain congestion because of the lockdowns in China. Chairman Cheng Cheng-mount from Yang Ming Marine Transport is optimistic the supply chain crunch has turned a corner. According to Cheng, lockdowns in China may be showing signs of easing and views China lockdowns as a short-term issue. Cheng also views global recovery taking a break with the global impact as a short-term phenomenon limited to second-quarter operations. Cheng projects that Beijing will adjust its COVID policy and China’s economy will rebound in the second half of the year.”
Once the accumulated cargo vessels start sailing, logistic experts are warning that a flood of containers could clog United States (U.S.) and European ports. Last year, the industry experienced a backlog of containers waiting to be unloaded at LA and LB, and this is projected to reoccur once the lockdown is lifted and economic activity restarts as products from accumulated orders from China surge into the U.S. The surge of imports to the U.S. from China is anticipated to occur in June or July, which more than likely will create congestion again for the Southern California ports.
Russian/Ukrainian War
Because of the war in Ukraine, port bottlenecks have increased supply-chain congestion worldwide as many ports continue to have Russian embargoed cargo taking up on-dock space. Russia’s invasion of Ukraine continues escalate and threaten more disruptions with many in the industry expecting the impact to continue to ripple globally throughout the year. The International Monetary Fund projects global trade growth to slow by 5% this year from an estimated 10.1% in 2021.
ILWU (International Longshore and Warehouse Union) Labor Negotiations
The Journal of Commerce on May 2, 2022, indicates all eyes are on the U.S. West Coast where negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association will begin contract talks this month.
Please contact your Western Overseas representative with any questions.
