China Archives | Page 21 of 26

Cutting production ties with China is impossible

May 10, 2023 | China, International Trade

In response to COVID developments and rising geopolitical tensions, companies may be re-shoring, or near-shoring production out of China, but the country’s dominance in world trade makes cutting it out of global supply chains impossible, say leaders of two of the world’s most important companies.

Europe is trying to reduce its dependency on China as the COVID-19 pandemic, coupled with the ongoing war in Ukraine, has highlighted reliance on dominant suppliers and the fragility of supply chains, but Mercedes-Benz CEO Ola Källenius, said that decoupling from China is unthinkable.

The major players in the global economy, Europe, the U.S. and China, are so closely intertwined that decoupling from China makes no sense to Mercedes-Benz.

Two of the company's top shareholders are Chinese, and China made up 18% of revenues and 37% of car sales for Mercedes-Benz in 2022, with more business expected to come out of China in 2023.

Michael Fitzgerald, deputy finance chief of Orient Overseas Container Line, acknowledged the trend to move production away from China, but pointed out that the absolute scale of production in China is huge. So huge, that even if Vietnam and India are growing their production by a bigger percentage than China, the relative scale means that there is still a huge proportion of the global supply chain reliant on China.

While Fitzgerald acknowledged that companies including Apple, Samsung, Sony and Adidas have shifted some production out of China he contends this represents an incremental shift and that they are simply not going to pack up and go. “It’s just not possible,” he said. “How would you want to shift that much production?”

The shape of US trade is definitely evolving, with container import volumes from China dropping 10% in just a year, while the share of imports from India and Thailand rose 5% and 4%, over the same period.

We continue to monitor the diversifying growth in production around south-east Asian countries including Vietnam and the growth in emerging markets, including Africa and Latin America, to support our customers’ diversification and sourcing strategies, but China is still a huge market serving all sorts of different products.

We have fixed price and long-term capacity agreements in place with sea and air carrier partners, to support trade with China, India and South East Asia, with resilient, consistent and reliable supply chain solutions.

Our cloud-based supply chain management platform, MVT, simplifies global sourcing, by making every milestone and participant in the supply chain transparent and controllable, down to individual SKU level.

EMAIL Elliot Carlile to review our current freight profile movements to and from China and Asia.

Asia blanked sailings, rolled cargo and detours

Feb 2, 2023 | China, Sea, Supply Chain

Shipping lines have cancelled almost 30% of pre and post Chinese New Year sailings from Asia, with THE Alliance cutting 36% to Europe and diverting backhaul sailings around the Cape of Good Hope, which adds two weeks transit time to China.

In a normal year, the weeks building up to China’s Lunar New Year holiday see a spike in export shipping demand from China to most global destinations, including the UK and Europe, as orders are shipped before the factories close and production halts. This year, however, there has been no demand spike and carriers across the three alliances have cut 15 westbound departures, with just 69 ships departing on a round-trip to North Europe or the Mediterranean since the beginning of the year and the start of CNY.

In the period from 1st January to 17th February, Alphaliner calculated that the three big carrier alliances are planning to skip 27% of their originally scheduled Asia – Europe sailings.

Across the Alliances, there has been a 29% reduction in the number of 2M sailings in the first seven weeks of the year, while OCEAN Alliance has reduced the number of westbound voyages by 23% and THE Alliance has cut most sailings from the Far East to Europe, with a 36% reduction. This is partly due to the fact that their carriers are diverting more backhaul sailings from the Suez Canal to the Cape of Good Hope, which adds two weeks to vessel arrivals back in China.

The shipping lines have also been creating roll pools, so that vessels leaving during the CNY holidays have boxes to load, while factories are closed. This occurs every year but, with less demand, it is having less impact than the previous three to four years.

Despite all the cancelled sailings and diversions, Hapag Lloyd has announced a new Asia-Europe service, FE9, that is actually a slot charter agreement with an alliance competitor, CMA-CGM.

Prior to the current three alliance setup, the shipping lines operated a complex web of slot charter agreements and it seems likely that the current high sailing cancellation levels are reducing service coverage, and an obvious solution for a carrier is this type of cooperation, that we may see accelerate in the wake of the 2M break between MSC and Maersk as they part company at the end of their 10 year agreement.

The 2M break may even result in a reshuffle of alliances, as carriers reshape the industry over the coming years on all trades. Although the focus has always been on the lucrative Asian markets - the transpacific and westbound European trades are the largest volume global lanes- one thing is for sure, there will be a lot more change, as a consequence of the unravelling situation in container shipping. It looks like a case of 'from boom to bust’ – although hopefully not quite so dramatic as we saw with Hanjin in 2016.

We work closely with our partners in China to monitor which lines are rolling cargo, and use our space agreements across all alliances wisely to ensure our containers are always lifted, though expectations are that roll pools will be cleared through weeks 5 to 8.

To learn how we can help you avoid blanked sailings and rolled cargo, or to request our regular ocean market report, please EMAIL our chief commercial officer, Andy Smith, who can advise on the best solutions for your ocean supply chain. We will always deliver the most appropriate service in an ever disrupted market and provide all options available to ensure that your product reaches the right destination, at the right time and at the right cost. Considered solutions are what we achieve.

Chinese New Year + COVID escalation = supply chain disruption in Asia

Jan 18, 2023 | China, MVT, Supply Chain

If travel for the Lunar New Year holidays increases COVID transmission, we will see large numbers of infected workers having to quarantine, which will delay their return to work and factories, hauliers, terminals and ports that would traditionally restart operations by mid-February could be shut significantly longer, with export and supply chain delays.

This Sunday, the 22nd January marks the start of the Lunar New Year and is the trigger for Chongqing-Chunyun, the Chinese New Year Migration, which is the largest annual human migration on earth, with hundreds of millions of people, working out of their hometowns, hurrying home to be with their families for the two-week holiday.

Factories and most other parts of Chinese society close down for the duration of the holiday (which is based on the lunar cycle), causing a pause in exports leaving the country, which is why traditionally we would see a spike in freight volumes - and particularly - air in the run up to CNY.

China’s economic growth of 3% in 2022 was the weakest since 1976, prompting the abrupt lifting of China’s strict zero-Covid policy in December. Unforeseen by many although encouraged for a long time.

With the recent rapid dropping of COVID restrictions across China, workers are more free to travel than they have been since 2020, which has led, predictably, to a surge in infections and with high levels of COVID in travellers leaving China for business and vacation, countries including the UK have introduced testing for incoming flights from China. Restrictions haven’t just been ‘eased’, but they have been withdrawn entirely in some areas. This is rapid deployment of the new measures.

If New Year’s travel does lead to increased transmission across the country, which logic dictates it is hard to avoid - large numbers of infected workers will need to quarantine, delaying their return to work, with means that supply chain infrastructure and factories that would traditionally restart operations by mid-February could be side-lined for significantly longer, resulting in export order and shipping delays.

Some importers are still carrying plenty of inventory and may not be impacted, but for those with products that are selling well, they may get caught up in the shortfall and a scarcity of bestsellers.

At the end of December, China stopped publishing daily COVID transmission data, possibly to conceal negative information about the pandemic circulating. But shippers will probably know sooner than just about anybody, when they don’t get the deliveries they were expecting out of China.

We have seen many factories and manufacturing sites throughout China shutting early this year already, either because they were quiet, or to give workers an extended break. This has contributed further to the lull in container movements, in what should traditionally be a peak week prior to the CNY celebrations.

There is, as a consequence, a huge number of shipping line schedule changes, blanking’s, suspensions and withdrawals over coming weeks and months, that will impact on vessel departures and planning reliability in China and across Asia. As a result, it could take a long time to unwind, with return eastbound voyages in March and possibly beyond.

Economists have warned over the state of the global economy in recent months and the International Monetary Fund (IMF) has urged Beijing to continue reopening its economy.

The IMF believe that if China stay the course - and do not re-impose COVID restrictions - by mid-year or there around, they will turn into a positive contributor to average global growth.

However, the full reopening of China's borders is likely to be delayed until international restrictions against China-originated travel are dropped.

On the upside with travel restrictions from and to China being relaxed the air cargo market is likely to see benefit with belly-hold capacity returning to pre-pandemic levels, as tourists look to travel once again, on passenger flights being re-introduced on routes that have been closed and which should result in reduced air freight costs, to and from the region.

As China emerges from its COVID stasis, we have fixed price and long-term capacity agreements in place with our partner carriers, to deliver resilient, consistent and reliable supply chain solutions.

Metro’s cloud-based supply chain management platform, MVT, simplifies global trading, by making every milestone and participant in the supply chain transparent and controllable, down to individual SKU level.

To discuss how our technology could support your supply chain, please contact Simon George our Technical Solutions Director or Elliot Carlile for all options relating to current freight profile movements to and from China.

China’s Zero-COVID release may boost global economy

Jan 5, 2023 | China, International Trade

The move by President Xi Jinping to lift China’s zero-COVID strategy and ease travel restrictions has raised hopes that it may soften the blow of higher global interest rates, unleashing production lines and unlocking supply chains after a turbulent three years.

From the 8th January 2023 travellers arriving in China will not have to quarantine and people are free to move internally in a series of steps to reopen the country, which bankers estimate will lead to GDP growth above 5% in 2023 and 4.2% in 2024.

Beijing’s streets are jammed with traffic again, there’s been a surge on foreign holiday bookings and business activity is picking-up, but removing restrictions has also led to a surge in COVID-19 infections, which will increase in the weeks ahead, as virtually every country that has transitioned away from restrictions has suffered an “exit wave” of infections.

Despite caution on the increased challenges to China’s medical system, domestic and international airlines are likely to benefit from the boost in travel and regional economies will also benefit from Chinese business travellers and tourists, as well as the easing of cross-border supply chains.

We have seen that, with greater stability going forward, Chinese manufacturing will return to pre-pandemic reliability, with stable component and raw material flows, which will have a positive effect on shipping and logistics from the region.

However, we have definitely seen a migration of business to other regions and areas over the last 12 months, which will likely disperse some of the sourcing that has been focused through China over the last decade, bringing new opportunities and dynamics to supply chains, as a result of the Draconian measures taken to restrict the virus spreading domestically. This will become evident in 2023 as traders reassess their manufacturing and global sourcing strategies.

China’s rapid reopening is reflationary for the global economy, which means that faster growth in China should also lift world GDP. But the benefits are unlikely to be felt evenly, because China exports more than it imports, which means western consumers, actually consuming, are critical to keep growth on track. However as widely reported in the international press consumer sentiment in Europe and the USA is subdued adding another variable into the recovery mix.

Within a day of Beijing lifting restrictions, a Zhejiang trade delegation departed for Europe to grab export orders, while the Suzhou Bureau of Commerce planned to charter flights to Europe after a trip to Japan returned with orders worth more £140 million.

In a bid to boost activity Alibaba, China's biggest eCommerce platform, is launching "Digital Hybrid Trade Shows”, with plans for 100+ overseas exhibitions, covering more than 10 trade target markets, including the UK, United States, Japan, Singapore and Australia.

Expectations for higher growth in China are encouraging some of the world’s leading fund managers to ease recession expectations, with inflation expected to fall very quickly in the US in 2023, half in the UK and fall a little more slowly in Europe.

Also considering the huge reduction in freight rates and the stabilisation of foreign Exchange (FX) over recent months the world certainly appears to be returning somewhere resembling normality, at least until the next challenge and change of events hits supply chains. But for now predictability and consistency are in a reasonable place in relation to supply chain and logistics strategies and planning with ASIA.

As new opportunities to trade with China emerge, we have fixed price and long-term capacity agreements in place with our partner carriers, to give you peace of mind, with resilient, consistent and reliable supply chain solutions.

Metro’s cloud-based supply chain management platform, MVT, simplifies global trading, by making every milestone and participant in the supply chain transparent and controllable, down to individual SKU level.

To discuss how our technology could support your supply chain, please contact Simon George our Technical Solutions Director or Elliot Carlile for all options relating to current freight profile movements to and from China.