China’s manufacturers braced for drop in orders as coronavirus outbreak snarls-up southern shipping hubs
- Severe congestion at Shenzhen’s Yantian port is spreading to Nansha port in Guangzhou following the discovery of several coronavirus cases in southern China
- Yantian and Nansha are among world’s busiest container ports, but Yantian is only operating at one-seventh of its usual level
Manufacturers in Guangdong are expecting export orders to slow in the second half of the year, due in part to skyrocketing cargo costs as well as shipping delays caused by the recent coronavirus outbreaks in southern China.
Yantian and Nansha are among world’s busiest container ports, with an annual volume of more than 30 million 20-foot equivalent units (TEU) combined, which would have made them the third busiest in the world in 2019.
We think the fee will continue to rise in the coming month. Besides, the exchange rate is particularly difficult to forecast. That will bring us very high risk
“We sense the problem of terminal congestion and vessel delays in Nansha port, of upwards of one week, two weeks or even longer. It’s becoming very uncertain because the Covid-19 outbreaks are getting worse in Guangdong,” said Jason Ding, who ships car parts mainly to East Africa from his manufacturing base in Guangzhou.
“Our business is actually very competitive. We do not dare to propose a price increase to our clients if our rivals don’t. What I’m going to do is to reduce the speed of receiving new orders, and wait and see.”
Boasting the most intensive international routes of ports in South China, Yantian mainly handles exports to Europe and the United States.
02:02
China’s southern Guangdong province in high gear to quash Covid-19 outbreak
Yantian port has a backlog of more than 20,000 containers to unload, with 40 container ships anchored in open water outside the terminal after it temporarily stopped accepting new containers on May 25 due to the severe delay facing container ships.
Yantian is still partially shut down, receiving only around 5,000 export containers a day from ships estimated to make port within three days.
Maersk said on Thursday that the situation “continues to deteriorate” as more positive coronavirus cases have been confirmed in Shenzhen, where Yantian and Shekou port are both located.
Some customers have already complained that the price of sourcing building stone from China has exceeded that of sourcing from Europe because of high freight costs
“Due to further measures being implemented, increased congestion and vessel delays upwards of 14 days are expected in Yantian port,” Maersk said.
MSC, the Swiss international shipping line, said on Wednesday that the overall operation productivity at Yantian had been “adversely impacted”, meaning it expects the current vessel berthing delays and port congestion situation to continue for “at least a week.”
“Some customers have already complained that the price of sourcing building stone from China has exceeded that of sourcing from Europe because of high freight costs,” said Liu Kaiming, head of the Shenzhen-based Institute of Contemporary Observation, which monitors working conditions in hundreds of Chinese contract manufacturers.
The current processing capacity of the port is only one-seventh of its usual level, Xu Gang, deputy commander in chief of the antivirus force at the port, was quoted as saying on Thursday by local media.
Home appliance and hardware exporters are all estimating that their orders are likely to be reduced for the rest of the year, said Kevin Huang, a Guangzhou-based trader.
“Combined with the sudden sharp rise in raw materials and shipping costs, we had to cancel several orders that then relocated to Southern Asian countries.”
So far, 70 locally transmitted coronavirus cases have been found across Guangdong province, including 14 asymptomatic infections. That includes 16 new cases confirmed on Wednesday, five of which were asymptomatic.
On Thursday, Guangdong upgraded its lockdown conditions, barring over 320,000 residents from leaving homes or their local community.
