Far East Trade

The rise of China’s economy has been a main feature in countless stories and articles over recent years. Due to the coronavirus lockdowns and recovery, some of the focus has shifted to other stories, but what is clear is that the US and China are intrinsically linked in international trade and the global economy. In this article, we will take a look at the aftermath of COVID on China, and their evolving role in the supply chain.

Container Loss Events

The second half of 2020 and the first half of 2021 saw an unprecedented amount of container loss incidents and delays. The World Shipping Council’s 2020 report estimates that an average of 1,382 containers are lost at sea each year. Over an approximately 6 month period from November 2020 – May 2021, over 4,000 containers were lost at sea due to various incidents. Nine of the high-profile recorded incidents involved ships that were originating in China bound for the US, including the One Apus which saw 1,816 containers lost or damaged at sea. This was one of the largest non-total loss incidents to be seen in container shipping. For more detailed information, please see our deep dive into container loss incidents in Falvey Foresight Volume 2.

Similarly, the Ever Given which was physically lodged in the Suez Canal for six days in May and then subsequently stuck by legal proceedings over financial compensation until very recently, was travelling from port-of-call in China to Rotterdam in The Netherlands. While the Ever Given did not see any physical damage to cargo, it was declared a General Average and is a marine insurance incident which did lead to delay and therefore potential damages for business interruption or spoilage.

These loss events had vastly different causes and impacts on the cargo involved, but they show the role that China plays in the overall market. By being one of the world’s largest exporters, and a vital lifeline that much of global trade flows through, China will be heavily impacted by any event that affects the supply chain.

Yantian Port

The largest port in China, the Yantian Port, was partially shut down from May 25 – 27, 2021 after five crew members aboard a ship docked at the port tested positive for COVID. Additional positive test results in port workers and those in the surrounding area had many concerned for their safety. Maersk called for suspended service in their terminal due to the risk. They thought it was best to exercise caution because of the sheer number of ships that pass through the port and the centralized location serving as a major link to both the US and the Europe.

At this time, port operations were already backed up and only operating at 50% - 60% productivity. According to Mirko Woitzik, senior manager of EMEA for Intelligence Solutions at Everstream Analytics in an interview with CNBC , “There are not a lot of vessels calling Yantian now. While you do have the occasional vessels calling to the port, it depends on how long they stay and if they pick up the export. They could just be dropping off the imports. The port productivity is increasing but will take time to work through. This just adds to the days vessels have to wait to get into port.”

Over 90% of the world’s electronics are exported out of the Port of Yantian. According to FreightWaves SONAR data, the largest-named consignee for the port is TV maker TTE Technologies with other major exporters including Tesla, Williams-Sonoma, QVC, Home Depot, Walmart, Amazon, and more.  

According to Woitzik, what’s really on everyone’s mind is that the carriers are canceling most port calls to Yantian until at least the middle of July which means that a lot of exports won’t leave the Chinese port until then. Some exporters will move their goods to other ports, but most will not because peak holiday shipping starts in August in order to make shipments in time to be on shelves for the holidays. The backlog only adds to the volumes of containers waiting in line to be transported.

It will take several weeks for the ripple effect of these backlogs in China to be felt in the US. When they are seen, will greatly depend on how the backlogs in the ports of Los Angeles and Long Beach have been handled by then as the main port of entry of goods from China is through one of these two CA ports.

While the news may portray an image of either the US or China standing alone or sometimes in conflict with one another, we can see the inarguable degree of interconnectedness within the supply chain. What the next development of the global supply chain will be remains to be seen, but the fate of these two economies is likely to reflect one another.

Falvey Foresight Subscribe - Falvey Cargo Insurance (falveycargounderwriting.com)

Covid outbreak: Satellite images show container backlog at Port of Yantian (cnbc.com)

Yantian port back at full speed; box recovery could take a month - FreightWaves