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China ports throughput hit by supply chain chaos

Containers handled by China’s eight leading gateway ports rose just 4% year on year in May 21-31, versus a double-digit growth seen in the first 20 days of the month

The supply side disruption, including the coronavirus-led port congestion in Southern China, is taking a toll on the country’s export capacity. Analysts expect freight rates to shoot up further

CONTAINER throughput growth at major Chinese ports slowed last month, highlighting the impact of the coronavirus crisis on the country’s southern export hubs and the disruption in the global supply chain.

Boxes handled by China’s eight leading gateway ports — led by Shanghai, Ningbo-Zhoushan and Shenzhen — rose 4% between May 21-31 year on year, the latest data released by the China Ports and Harbours Association shows. Among those, export and import container volume was up 3.9%.

That compares with a 13.3% and 16.8% increase, respectively, from May 11-20, and 15.8% and 24.2% during the first 10 days of the month.

The slowdown is partly a result of the situation at Shenzhen’s Yantian Port, where operations have been largely halted since the first infection case was confirmed on May 21. The congestion has spilled over to nearby Chinese hubs, including Shekou and Nansha.

Industry experts warn that the ripple effects from the logistics bottleneck will put further pressure on an already fragile supply chain.

As a key export facility in China’s Guangdong province, foreign trade container throughput at Shenzhen surged about 50% for the first 20 days in May, according to the China Ports and Harbours Association.

The association suggested the growth issue lies more on the supply side rather than the demand side.

“According to port feedback, trade demand remains strong, with a rebound in the shortage of vessel slots and empty containers for export cargo,” it said.

The situation comes as China posted a lower-than-expected result for May exports, despite a 27.9% growth year on year in US dollar terms.

Chinese investment bank CICC reckoned in a report that the serious supply chain disruptions appear to have negatively affected the export performance.   

“The May global PMI suppliers’ delivery time continued to slow at record levels, freight rates keep surging and the pandemic fallout has further reduced the operational efficiency at some ports in China and Southeast Asia. The breakdown of export/import data has also shown the impact from the [tight] supply of bulk commodities and chips.”

But the bank is optimistic about China’s exports for 2021, expecting a full-year growth of 18.4%.

It said that while demand for personal protective and home office equipment will drop as the lockdowns abate, the bloated household savings overseas are expected to bolster the sales of Chinese products. What is more, the reinstatement of factories globally will also perk up procurement of capital and intermediate goods.    

“China’s exports will remain at high levels in terms of absolute value in the coming months. However, the growth rate might become weaker.”

On the other hand, concerns are mounting about a further spike in shipping rates amid the logistics chaos exacerbated by the ongoing port congestion.

CICC said small manufacturers with less bargaining power are bearing the brunt of increasing costs, with some of them now less active with regard to taking in orders.

In comparison, container line shipping carriers have seen their earnings and share prices shoot through the roof.

Han Jun, a transport analyst at China Securities, revised up the target price of Shanghai-listed Cosco Shipping Holdings to Yuan38 ($5.95) per share. The stock closed at Yuan22.75 on June 9, up from Yuan3.47 a year ago.

Mr Han estimated that the ports’ logjam has consumed about 6% of the existing boxship fleet capacity, although it is offset by the faster steaming of vessels by 4%.

He expected the freight rates, which are already at historical highs, “to continue breaking records”, with considerable scrapping of old tonnage to be sparked by stricter emission rules and another round of inventory replenishment to be fuelled by massive government stimulus packages in major economies.

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