Global Trade Chaos Looms Due to China’s Massive Port Jam

Updated on

Ensuing restrictions of a now-controlled COVID 19 outbreak in southern China in late May have caused an enormous shipment pileup, bigger than that of the Suez Canal.

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The Yantian port –50 miles north of Hong Kong– was closed for a week, and upon reopening, the hopes of it soon going back to full operational capacity are dwindling, causing massive delays in both outbound and inbound shipments.

According to Bloomberg data quoted in Aljazeera, there are 139 container vessels currently anchored off the Chinese coast, which accounts for more than 50% of the average in the mid-April to early May period.

Domino Effect on Freight Caused By Port Jam

Upon reopening, the port was supposed to be operational in a few days, but as the partial closure dragged on, trade routes have been clogging, skyrocketing the price of goods.

Yantian port authorities say they will return to normal by the end of June, but the damage has already been done since the port is still lagging in going back to its 36,000-container-per day capacity.

Even more critical, as informed by CNN, the bottleneck in Yantian has “dominoed” into other ports in Guangdong like Shekou, Chiwan, and Nansha –all of them located either in Shenzhen or Guangzhou– the fourth and fifth largest comprehensive container ports in the world.

The shipment backlog is creating an enormous problem for the world's shipping industry, and it threatens with spoiling late-summer shopping activities around the globe’s retail sectors, which were desperately hoping for a recovery. The fallout is expected to spread to ports around the world.

Ocean Freight Already Up Against the Wall

“The trend is worrying and incessant congestion is becoming a global problem," says a spokesman from AP Moeller Maersk A/S Class B (CPH: MAERSK-B), the world's largest shipping company by number of containers.

However, what is happening in the south of China is one more “in a series of disasters that have accumulated in the global supply chain,” according to Nerijus Poskus, vice president of ocean strategy and carrier development at Flexport. He estimates that congestion in Yantian alone will take six to eight weeks to clear in full.

The “Chinese clog-up” is threatening global trade as the outage in goods will coincide with the late summer peak demand period in the U.S. and Europe, and some experts believe that the shockwaves will be felt even ahead of the year-end holiday shopping rush.

The Federal Reserve pumped up its inflation predictions on Wednesday, partly due to the constricting supply of goods, with container rates in various routes costing up to seven times more – an increase to $11,196 for a 40-foot box to Rotterdam from Shanghai, as reported by Aljazeera.

According to BBC, ship schedules and supply chains back then took several weeks to recover after the ship that jammed the Suez Canal in March was freed. Now, according to predictions, it can take months for the cargo pile-up in southern China to clear.

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