Supply chains around the world are about to experience another hiccup.
Yantian, serving 100 ships weekly as one of the busiest ports in the world, has been partially shut for the past week because of a COVID-19 outbreak. Given that Yantian processed 13.34 million twenty-foot equivalent units (TEUs) in 2020, this slowdown will further hit lean and struggling supply chains.
Carriers like Maersk and Hapag-Lloyd said they were rerouting ships in an effort to minimize disruptions. Maersk has suspended until further notice all operations in the western area of the Yantian International Container Terminal (IYICT). Pickup of import-laden containers in the eastern area of the port will only be available to vessels within ETA-3 days only after the terminal confirms the advance reservation made by trucking companies.
In its May 31 update, the shipping giant characterized the situation as “continues to deteriorate” with more positive COVID cases being confirmed in Shenzhen where the Yantian port and Shekou port are located.
The Federal Maritime Commission has been briefed on the situation. A representative of FMC Chairman Daniel Maffei said, “The chairman is aware of the situation but has no official comment on it at the moment.”
FMC Commissioner Louis E. Sola said, “The reported disruption at Yantian is another example of how interconnected the ocean freight delivery system is and how events on one end of the world impact facilities and supply chains somewhere else on the globe.”
It takes people to move trade. One forward-looking indicator to assess the impact of this outbreak is drayage.
Maersk explained in its update that the partial closure, along with disinfection and quarantine measures, have caused containers to pile up at the Yantian International Container Terminal (YICT) yard. Operation in the eastern area of the terminal where delivering vessels are mainly unloaded continues to experience “low productivity of about 30% of its normal level.”
Maersk said it expects continued terminal congestion and vessel delays upwards of seven to eight days in the coming week.
This partial closure will increase not only the time in the delivery of products but also price.
Asia to the West Coast is up 236% from the same time last year. Asia to the East Coast is up 190%. This does not include the premium rates and other charges being paid by U.S. and global importers. U.S. exporters tell American Shipper they are paying in excess of $17,000 per container because of those additional costs.
“The price of my freight is up over 300%,” said one importer who wished to remain anonymous. “I can’t even guarantee when the product will arrive because space on vessels is so limited.”
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“I think we are in a sort of experimental phase here and mainly because of the uncertainty on how long consumers will prefer goods instead of services,” said Antonella Teodoro, senior analyst at MDS Transmodal.
“Based on our latest data on the supply side (MDST Containership Databank), we derive that for the current quarter shipping lines are increasing the level of capacity on the services linking North America to the Far East by circa 5.6% as compared to last quarter.”
This latest swing in the pendulum of trade will have a knock-on effect of creating more delays along the trans-Pacific, as well as the Far East-North Europe trade route. According to the Securities Times newspaper, Yantian handles nearly 90% of Shenzhen’s U.S. and Europe’s exports, with approximately 100 routes impacted. This in turn will delay European exports to North America.
After all, the world is fully connected.