Global supply chain issues worsen as China reopens major port

China begins to reopen world's third-largest port amid worsening of global supply chain issues

China begins to reopen world's third-largest port amid worsening of global supply chain issues

China is starting to reopen one of the terminals at the third-largest container port in the world, Ningbo-Zhoushan, after a two-week closure because of a Covid-19 scare.

The port's Meishan terminal is in the process of reopening and should be fully operational by Sept. 1, market participants said according to Argus Media, although this has not been confirmed by port authorities. The terminal was closed on 11 August after a single worker tested positive for Covid-19.

The shutdown of the terminal at Ningbo-Zhoushan, China's second-largest container port behind Shanghai, has disrupted vessel schedules, hit bunker fuel demand and raised concerns of delays to shipments of metals and consumer goods from the port.

The Meishan terminal handled around 5.5mn twenty-foot equivalent units (TEUs) last year, accounting for around 20 percent of the total at Ningbo-Zhoushan.

Chinese authorities have clamped down strongly on a recent outbreak of the Delta variant of Covid-19, sending new domestic cases to zero on 22 August, according to official figures. Other ports in China have tightened quarantine measures to stem the outbreak, slowing vessel discharges and raising freight rates for coal and other bulk products.

However, while the development is positive for the global shipping industry, the world's supply chain problems appear to be getting worse and could continue well into 2022 by some estimates.

Fresh produce company Vanguard International recently provided a detailed analysis of the global logistics issues in a piece entitled: Where in the world is my container?

Bloomberg reports that the supply chain crunch was initially meant to be temporary, but now looks set to be prolonged as the surging delta variant upends factory production in Asia and disrupts shipping, posing more shocks to the world economy.

Manufacturers reeling from shortages of key components and higher raw material and energy costs are being forced into bidding wars to get space on vessels, pushing freight rates to records and prompting some exporters to raise prices or simply cancel shipments altogether.

“We can’t get enough components, we can’t get containers, costs have been driven up tremendously,” said Christopher Tse, chief executive officer of Hong Kong-based Musical Electronics Ltd., which makes consumer products from Bluetooth speakers to Rubik’s Cubes.

Hsieh Huey-chuan, president of Taiwan-based Evergreen Marine Corp., the world’s seventh-biggest container liner, was quoted as saying: “Port congestion and a shortage of container shipping capacity may last into the fourth quarter or even mid-2022. If the pandemic cannot be effectively contained, port congestion may become a new normal.”

The cost of sending a container from Asia to Europe is about 10 times higher than in May 2020, while the cost from Shanghai to Los Angeles has grown more than sixfold, according to the Drewry World Container Index. The global supply chain has become so fragile that a single, small accident “could easily have its effects compounded,” HSBC Holdings Plc. said in a note.

Subscribe to our newsletter