Yangtze

Climate change forcing new unexpected factory closures in China

Aug 31, 2022 | , , ,

Just a few months after Shanghai emerged from the city-wide COVID lockdowns, which disrupted supply chains and forced factories to halt operations, manufacturers have been closed again, this time by the impact of climate change. A new challenge to Chinese production and sourcing.

An intense heatwave and drought around the Yangtze river basin has seriously depleted water levels in dams and rivers, curbing electricity generation at hydropower plants, just as air conditioning demand is spiking.

To prevent power outages, authorities in Sichuan province, which relies on hydropower for about 80% of its energy needs, ordered factories to halt operations, with data showing that the impact of closures is climbing amid concerns that power rationing could have a knock-on effect for supply chains.

These energy linked closures, that have been reported in the international press, could have more impact than COVID-related factory closures, which were geographically compact in specific locations and operations can gradually resume under“closed-loop” conditions, while the effects of power shortages can be more extensive and indiscriminate.

Sichuan, Chongqing and Hubei provinces export power to manufacturing hubs on China’s east coast, but this year, Sichuan’s hydropower has operated at 20% of capacity, and as the river flow rates remain depressed, Sichuan hydropower generation loses the capacity to meet the minimum level of demand. So the situation is much more widespread throughout China’s manufacturing regions than it would first appear.

The heatwave sparked huge demand for electricity as hundreds of millions of people turned up their air conditioning, which in turn led to major power shortages, with authorities suspending or rationing electricity supply to factories, shopping malls, homes, and public transport.

Sichuan province began to restore power for some industrial users at the start of the week, but the impact on the broader economy from the heatwave, has been severe, drying up the rivers that feed hydroelectric plants, including China’s largest the Yangtze, which dropped to its lowest level on record.

Light to moderate showers are moving into central and southern China and may intensify this week across the drought-stricken Sichuan basin, bringing a risk of flash floods and some areas could see up to twice as much rain as usual, which should help replenish reservoirs, but drought warnings are still being maintained and power rationing continues in many areas.

The Chinese economy growth has been severely downgraded by leading experts for 2022 and as the ubiquitous saying goes when China sneezes the world catches a cold – let’s hope this isn’t the case.

We continue to monitor the situation and will update you if anything significant occurs, but we do recommend checking with any of your vendors in the Sichuan, Chongqing and Hubei provinces, to check if they have been affected.

Metro’s cloud-based supply chain management platform, MVT, simplifies the most demanding global trading regimes, 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 any of your Metro team contacts.

Shanghai lockdown

China Update; Testing prompts Shanghai lockdown scare

Jul 21, 2022 | , , ,

With individual district lockdowns and mass testing again underway, the trade press have been reporting that Shanghai could go back into lockdown, which would be a major disruption as we enter the traditional peak season.

It’s been just six weeks since Shanghai emerged from its two-month zero-COVID lockdown and several districts have been subjected to lockdowns and mass testing again.

Officials said the measures were needed to avert another citywide lockdown, but the press highlighted that mass testing has generally been the precursor to further lockdown restrictions in China.

Our colleagues in Shanghai confirm that localised short-term lockdowns and testing did take place in a number of districts, but they are not experiencing any issues moving sea or air cargo.

And even with more widespread testing this week, in nine of 16 districts, they think that a total lockdown is unlikely. They anticipate more focused lockdowns, that concentrate on specific districts, which would be far less disruptive to supply chains.

The lockdown threat is not limited to Shanghai, with 30m people currently under some form of COVID restrictions, with hot spots in Henan province and Guangzhou, which is also carrying out mass testing again.

The latest Covid scare comes at a time when China’s ports and supply chains are already under pressure and raises fears that local lockdowns will result in further congestion in already strained ports.

Container ships visiting China have already been affected by recent typhoons, impacting operations in Ningbo, Shenzhen and Hong Kong, with fewer vessels berthing.

The average waiting time for vessels to berth at Shanghai last week was up from 12 to 24 hours and most terminals experienced severe congestion at Ningbo, due to the bad weather.

COVID testing requirements haven seen longer berthing times at Yantian and Qingdao had been impacted by fog and bad weather, with average waiting times increasing 48 to 96 hours.

Peak season, expected from late July and August, could see worsening congestion leading to potential delayed or blank sailings, if the situation deteriorates, which will continue to put pressure on capacity and rates.

We are working closely with our local partners to follow the evolving situation in Shanghai and around the country and will continue to share any important developments.

With the long term fixed price and capacity agreements we have in place with our partner carriers, we are well positioned to continue to deliver resilient, consistent and reliable supply chain solutions, however the situation in Shanghai develops.
Our cloud-based supply chain management platform, MVT, makes every milestone and participant in the supply chain transparent and controllable, down to individual SKU level, which means you can adapt and flex your supply chain, as the local situation changes. 

To discuss how our technology could support your supply chain, please contact Simon George our Technical Solutions Director or Elliot Carlile.

HKG port

Forecasting and protecting your Asia supply chain

Jun 16, 2022 | , ,

Global sea freight operations have struggled with disruptions since the outbreak of the COVID pandemic over two years ago, and this has continued into 2022, with a peak shipping season this summer that is likely to be very chaotic.

China’s zero-COVID strategy lockdowns have slowed supply chains and Russia’s invasion of Ukraine has effectively ripped up any imminent recovery of the supply chain, which has been grappling to deal with the implications of these and many more disruptions. 

The two month lockdown in Shanghai and limited operations at the world’s busiest container port has severely limited the production and shipment of vast quantities of exports, which, with the lifting of lockdowns, could result in “panic shipping” following a build of filled containers destined for the West, which has been estimated at 260K teu.

The Shanghai lockdown is over but don’t expect business as usual. With factories and inland logistics returning to full staffing levels, everyone wants their purchase orders to be ahead of the peak season and make sure that their cargo reaches destination on time, which is likely to result in further price rises as importers scramble for equipment and vessel capacity. 

With carriers adapting schedules and diverting to other ports, in the wake of Shanghai’s lockdown, delays have been building up across Asia, with many ships waiting offshore and posing yet another challenge as Chinese manufacturing and exports reopen fully. 

In addition to Shanghai, Shekou, Hong Kong, Ningbo, Xiamen and Yantian are all seeing delays, with Rotterdam really struggling on the European leg. 

Container ships deployed on Asia/North Europe route currently need on average 101 days to complete a full round voyage, which means that they arrive on average 20 days late in China and is why congestion is forecast to continue long after volumes return to the market.

It is vital to note that the issues impacting China are being repeated across the Far East, South East Asia and the Indian Subcontinent into the UK and Europe.

The most effective option for importers that want to protect shipments from Asia and the ISC against the risk of delays due to capacity constraints, is sharing their upcoming order books for June and Q3, so that we can allocate the most appropriate space and protect equipment on our contracts.

The long-term fixed validity contracts we negotiate with all major carriers, across the three alliances, have proven benefits in consistency of service and capacity, but only when we have transparency of shippers’ requirements, as far in advance as possible.

Vessel bookings that are made 28 days before the cargo ready date give shippers the best chance of securing space and equipment and ensure that allocations are at the correct levels and at the correct origins.

The prudent shipper will share information on a weekly or fortnightly basis including:
Annual volumes in comparison to 2021 with indicative total TEU requirements
Six week or more rolling volume forecast
Per week / Per port of loading / Per container size

Sharing information greatly assists our efforts in keeping your supply chain moving, avoiding costs and minimising delays.

The long-term fixed price and capacity agreements we have in place with our partner carriers mean that we are well positioned to continue to deliver resilient, consistent and reliable supply chain movements, whatever challenges you face.

Metro’s cloud-based supply chain management platform, MVT, creates resilient and flexible supply chains, by making it easy to adapt and control milestones and participants in the supply chain, 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.

Yantian 3

China exports surge even as consumer demand weakens

May 30, 2022 | ,

Container volumes at eight of China’s top ports surged 25% to 16.8 million TEU in April, largely driven by consumers in Europe and the US, but manufacturers are anticipating weakening demand.

According to figures released by China’s Transport Ministry, only Shanghai recorded a decline in sea freight throughput in April, the first full month of the city-wide lockdown that has closed factories and slashed trucking capability and capacity, due to government restrictions in the movement of its Citizens.

Transport Ministry figures show month-on-month volumes at Shanghai fell 19% in April to 3.1 million TEU from 3.8 million TEU in March, while other ports, including Tianjin (+48%) Shenzhen (+43%), Guangzhou (+35%), Ningbo (+32%) and Qingdao (+31%) experienced double-digit increases.

Ningbo’s 32% increase in volumes, to more than 3 million TEU in April, was massively boosted as shippers diverted cargo, to avoid the disrupted trucking and port operations in Shanghai.

With Shanghai starting to ease lockdown restrictions carriers are reporting improving logistics and supply chain performance, with Maersk resuming operations at 25% of warehouses, including facilities in Pudong, the area closest to the main port areas at Yangshan and Waigaoqiao.

Despite the massive volumes moving through China’s ports, manufacturers are bracing for more pain as rising interest rates and inflation combine to increase prices and dampen US and European shoppers’ enthusiasm for goods, with many already shifting towards buying services than goods.

Some manufacturers are reporting that while overall demand remains robust, orders for delivery in the final quarter look weaker, with buyers becoming very tentative in restocking and ordering.

While some of the spending shift reflects a return to normal buying habits, some of it also reflects rising inflation and interest rates, fading government stimuli and volatile financial markets.

The slowdown isn’t a trade recession because underlying demand remains solid and consumers do have money to spend, but the downshift is notable and the WTO lowered its projection for growth in merchandise trade this year to 3%, down from its previous projection of 4.7%, while Asia’s manufacturing sector contracted in April for the first time since June 2020.

Evidence from South Korea, often seen as a bellwether for international trade, is showing an enduring slowdown in exports, with shipments from Taiwan also down and China’s lingering zero-COVID policy creating further hurdles.

While many financial indicators may point to risks in the global economy, amid recession warnings, we’re not there yet and any slowdown will enable global supply chains to shake off any lingering ‘performance’ issues, which in turn will ensure that the recovery, when it comes, will be super-charged by cost-effective and efficient global freight infrastructure.

Whatever challenges your supply chain may face, the long term fixed price and capacity agreements we have in place with our partner carriers mean that we are well positioned to continue to deliver resilient, consistent and reliable supply chain movements.

Metro’s cloud-based supply chain management platform, MVT, simplifies the most demanding global trading regimes, 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.

Category: China

China | Coronavirus | Sea | Supply Chain

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