China Archives | Page 23 of 26

Forecasting and protecting your Asia supply chain

Jun 16, 2022 | China, Sea, Supply Chain

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.

China exports surge even as consumer demand weakens

May 30, 2022 | China, Supply Chain

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.

Demand for Shanghai sea exports may divert to air freight

May 30, 2022 | Air, China, Sea, Supply Chain

As COVID lockdown measures are gradually relaxed in Shanghai it is uncertain how quickly export sea freight volumes will rebound, but many experts are anticipating a strong and sustained spike in demand creating a backlog of shipping containers, which could once again result in ocean shipments diverting and putting pressure on air freight, which is already experiencing reduced availability due to the lack of passenger aircraft, restricted movement through Russian airspace and carriers not finding the long haul route economically viable.

Shanghai port - the world’s largest container port - has remained open while the city’s lockdowns have disrupted manufacturing, trucking and freight operations for the past two months and the strength of the city’s manufacturing output recovery will determine if freight rates, which have stagnated, will increase sharply as peak season approaches.

While some believe that factories will recommence manufacturing steadily over coming months and ocean container shipping will resume the seasonal ups and downs we’ve been accustomed to before COVID-19, others point to the tremendous amount of cargo that is already awaiting shipment, estimated at 260k TEU, which combined with pent-up demand, can only result in a surge of pressure on container movements from the region.

The port is basically bursting with containers, and if not cleared or substantially reduced, there may be little room for export loading movements to occur as smoothly as they normally do, which in turn could pile on the pressure at Shanghai Pudong (PVG) airport.

Vessel traffic around the port is increasing with currently more than 3% of the global container fleet capacity stuck there and wider congestion is still having a profound impact, with serious congestion in both American and European ports causing sailings to return to Asia late, resulting in additional delays and blank sailings.

Meanwhile the huge backlog of containers at Shanghai grows, with no capacity to shift it and when you have all this capacity constraint and demand on the ocean freight side, cargo will simply begin diverting to air freight, to recover failures and delays in the supply chain.

Importers who need their products to meet market demand, or to use in production, will use air to get those products as quickly as possible and that will also have an influence on capacity, which is more scarce today than it was two years ago. We know this as distressed sea freight and add this to the planned air freight for higher value products, with peak season due at the end of Q3, then there is likely to be a spike once production flows are recovered in the factories.

This could contribute to already elevated air freight rates, which have remained elevated due to the lack of capacity that followed airspace restrictions and the Shanghai lockdown.

Shanghai is loosening lockdown restrictions now, with the normal manufacturing and logistics environment likely to return in June and when it happens, we expect to see a surge in air freight volumes as shippers expedite products, that are needed on shelves the UK, Europe and the US.

We will continue to closely monitor the situation and update you as changes occur, but we do recommend checking with your vendors, to clarify the status of your orders.

We hope to see supply chains start to flow freely again quickly, as the pent-up demand for delayed goods could quickly create congestion, if operations are not running optimally.

We expect demand for space and spot/ FAK rates to increase very quickly and would suggest you start talking to us now about your potential requirements, so we can put appropriate plans in place.

To discuss how we support and protect your supply chain, please contact Elliot Carlile.

Foreign workers leave China and it is likely to continue as China ‘reshapes’ commerce

May 19, 2022 | China, Supply Chain

Strict border controls amid China’s zero-COVID policy is creating a shortage of foreign expertise, with some suggesting the development could become a permanent feature, with ramifications for supply chains and an accelerating factor for consideration of production moving to alternative origins.

China’s foreign national population has plummeted during the COVID pandemic, with hundreds of thousands of expats returning home since 2020 and many have never returned, with more leaving in an exodus since the lockdowns in China were implemented. It is also widely reported in the international press that more non-domiciles will be exiting China and Hong Kong in the near future.

Nearly two years after China introduced a virtual ban on foreign nationals entering, border restrictions remain extremely tight, with work permits requiring an invitation letter from the Chinese government.

Large numbers of expats are effectively stranded outside China, with as many as 100,000 waiting for permission to return to Shanghai alone. It’s unclear exactly how many foreigners remain in China, though a 2020 census estimated there were around 850,000 overseas nationals living on the mainland and websites serving China’s foreign community have experienced steep drops in traffic since 2019.

The expat shortage is causing businesses serious headaches, because foreign staff often have skills and established networks in overseas markets that are hard to replace.

In some sectors, companies have begun offering massive wages to attract international talent. In others, hiring from overseas has become so difficult, many firms have simply given up. Or rely totally on on-line connectivity – this effects all parties involved both within China and overseas.

And the situation could potentially get worse, with The Loadstar reporting that a survey by the German Chamber of Commerce in China shows nearly one-third of foreign employees plan to leave permanently, with 10% aiming to do so before their current employment contract ends.

With many Shanghai expats still unable to leave their apartment building or gain access to basic necessities, Chinese employers are bracing for a mass retreat of foreign talent this summer.

The owner of a rail components manufacturing firm in Northeast China said he had dealt with all sorts of supply problems, but never expected that a shortage of foreign workers would be one of them.

That, however, is exactly what he’s facing two years into the pandemic, as one by one, he lost all of the overseas executives who used to work under him and he says the impact has been devastating, but local hires lack the international experience the firm needs and recruiting foreign professionals has become impossible.

The owners comments are supported by the German Chamber’s survey, which shows businesses allowed to resume production under lockdown are operating at 46% of their total production capacity.

Furthermore, respondents said their company’s production capacity was hampered by lack of logistics availability (69%), missing raw materials and pre-products (69%), missing transport permits (56%), additional workers cannot leave their compound (56%) or their districts (43%) and uncertainty due to rapidly changing policies (41%).

Pressure from international clients is increasing as trust in Chinese supply chains is decreasing. Supply chains can’t be changed overnight, but they can with time, and the longer the disruptions in China last without any signs of improvement, the more supply chains will be transferred to other countries outside of China.

Metro are constantly reviewing the situation and we have both local colleagues ‘on the ground’ and international teams. We have it covered with our approach and up-to-date market intel and will continue to encourage international travel and the movement of stakeholders involved in our clients business requirements, globally.