Covid-19 Shipping Problems Squeeze Exporters from China

Chen Yang, who runs a textile trade unit in a state-owned enterprise in southern Hefei, said the business, which exports mostly to the United States, has withstood the pandemic and the China-US trade war, but expects to is losing money this year in part due to a sharp rise in shipping costs.

A 40-foot container that arrived in Charleston, SC, in December cost Mr. Yang about $ 7,500, up from $ 2,700 in April, he said. He must also reserve space on the ship at least 20 days in advance, more than twice the usual time.

“I have not seen anything like this in my 18 years of experience as an exporter,” Mr Yang said. “We’ve been operating with losses since August.”

The problem has been exacerbated by a worsening imbalance in global trade. In November, China recorded a record trade surplus of $ 75 billion, fueled by strong consumer demand in Western countries ahead of the holiday season for everything from electronic gadgets to furniture and bicycles.

Major U.S. ports imported 2.21 million 20-foot containers in October, up 17.6% from a year earlier, and set a record since the National Retail Federation began tracking imports in 2002. rates in Asia in Europe reached a 10-year high in December.

Pandemic safety measures have reduced efficiency in ports, leading to delivery delays and blockage of containers worldwide. In November, only half of the world’s carriers managed to stay on time, compared to 80% a year ago, according to a reliability index of Sea-Intelligence services.

The average delivery time for containers returning to China was up to 100 days in December compared to the most typical 60 days, according to the China Container Industry Association.

“Logjam is completely unprecedented, both in terms of growth and duration,” said Tan Hua Joo, a Singapore consultant at Liner Research Services.

While economists say shipping problems have not yet derailed China’s solid recovery, they are a challenge to sustain the export growth that has driven it.

The official index of Chinese purchasing manufacturers, an indicator of the activity of the Chinese factory, suggests that growth slowed in December. A sub-index for new export orders fell compared to the previous month to 51.3%, although it is still in expansion territory.

China’s rapidly appreciating currency, the yuan, which has risen more than 8% against the US dollar over the past six months, is also eroding profit margins for Chinese traders, most of whom still accept payments in US dollars.

Bruce Pang, head of macro and strategic research at China Renaissance Securities, said high transportation costs are likely to remain a major headache for most Chinese exporters until the February Lunar New Year holiday, when most factories will close at least two. weeks.

“It will certainly strain cash flow for some smaller exporters, especially those who trade low-margin goods,” Mr Pang said. Many manufacturers have been reluctant to expand capacity and are cautious about taking new orders, he added.

Tony Chen, a toy exporter in the southern Chinese city of Shantou, said many of his customers in the US and Europe told him to stop delivery because heavy logistics costs had eroded their profit margins.

“It was very frustrating,” he said, adding that he had stopped accepting new orders from customers in recent weeks because he could not guarantee when he would be able to deliver.

In early December, China’s Ministry of Commerce promised to increase container production to ease the supply shortage, as well as monitor the shipping market more closely to stabilize costs.

But solving problems will not be easy. China International Marine Containers (Group) Co., the world’s largest container maker, told investors in November that its plants are fully booked by the end of March. Over 95% transport containers are built in China.

Throwing away several boxes of containers could lead to overcrowding, but some say this is the only viable option to ease the shortage now.

“You’re damn if you do and you’re damn if you don’t,” said Charles Du Cane, commercial director at Seastar Maritime Ltd., which operates dry bulk carriers. “The real solution to all this is to deal with the pandemic and the global logistics system.”

Logistical challenges also lead some exporters to rethink their supply chains. Shenzhen Xuewu Technology Co., an electronic cigarette manufacturer based in Shenzhen city in southern China, mainly sells to consumers abroad. While 90% of its steam products are shipped by air, these rates increased by about 30% in December compared to a year earlier, with the lack of transport containers forcing more exporters to send their goods by air. said Fiona Fu, who runs the company’s overseas logistics. Logistics costs now account for about 5 percent of the company’s total costs, up from 1 percent to 2 percent before the pandemic, she said.

Demand in existing markets, such as Canada and Southeast Asia, increased during the pandemic as more people spend time indoors, according to Derek Li, co-founder of Shenzhen Xuewu. This accelerated the company’s plan to supply more products locally to reduce dependence on Chinese exports.

“We want to be closer to our consumers, and to put less pressure on logistics,” Li said. “We will not let the pandemic stop us from expanding.”

Write to Stella Yifan Xie la [email protected]