Weak international demand for Chinese goods has led to increased freight cancellations at the country’s largest ports, hampering the expected economic boost from its exit from zero-Covid policies.
Industry participants in China point to an increase in “blank sailings,” where carriers miss ports because they don’t have enough cargo to carry or fear delays.
While cancellations are typical within the industry and usually spike during the Lunar New Year, supply chain data provider Drewry said the rate was “exceptionally high” this year, due to lower demand in the West. China’s exports have fallen for three straight months, weakening the basic foundation of its faltering economic model.
Dre said the cancellation rate for ships traveling eastward from Asia across the Pacific or to Europe will reach 31 percent over the coming weeks, compared to 23 percent during the same period last year and 16 percent in 2021.
In addition to weak demand, there are fewer to ship after hundreds of millions of estimated Covid-19 cases over the past month have added stress to the country’s supply chains, leading to staff shortages and factory closures.
What happened to the freight market as the virus spread everywhere in China. . . said Mark Young, CEO of Shanghai-based Asia Maritime Pacific, which owns a fleet of dozens of ships.
“There are many empty vessels in the market but fewer goods ready for shipment,” he added, comparing the situation to the onset of the Covid-19 pandemic in early 2020.
China’s massive infrastructure connecting factories and ports has grappled for three years with a strict non-spread Covid regime, which required frequent quarantines of personnel and “closed-loop” operations. The policy led to delays and cancellations, but exports greatly boomed during that period as demand for the goods rose.
Simon Sundboell, founder and CEO of data provider eeSea, said the nature of the disruption has now changed, from a scenario driven by delays within a “hot market” to one of weaker demand.
“The industry is slowly getting back to normal and you need to cancel more because of the demand cut,” he said. “Last year, it was because of all these excessive delays.”
A Shanghai-based manufacturer, who requested anonymity, said carriers “don’t enter ports just because there is no volume.” He added that the decrease in demand “has led to shipping lines reducing the number of ships in circulation.”
The coronavirus outbreak is “absolutely” contributing to the increase in empty sailings, said Jean Dielemann, president of Cargill Ocean Transportation. The commodity shipping group has not canceled deliveries but has reduced coal shipments to China in recent months, in part due to seasonal changes in demand.
Young said Asia Maritime Pacific had to cancel a sailing to a port on the Changjiang River to collect steel-related goods because the factory could not produce them in time. Another ship is expected to be sent for collection within a month.
Blank sailings have increased globally over the past year on a weak economic backdrop. In China, the first nationwide outbreak of the coronavirus coincided with preparations for the Lunar New Year. It is possible that demand could be “volatile given the holiday shutdown in China combined with both the Covid situation and the ongoing inventory correction in the US and Europe,” said Danish container shipping company Maersk.
However, Anne-Sophie Zerlang-Carlsen, head of ocean operations for Asia Pacific at Maersk, suggested that the broader easing of COVID-19 measures was “a very positive development that has the potential to significantly lift the Chinese economy.”
Cargill’s Diliman said the shipping industry was now dependent on a recovery in economic activity. People think this is the first [Covid-19] “A wave will go,” he said. There will be stimulus from the government. So people start to get optimistic.