Boxed out: China's exports pinched by global run on shipping containers

Singamas Container Holdings

11/12/2020 24:47

(Repeats story published on Dec. 10, no changes in text.)
    * Container crunch as China has lopsided trade balance 
    * Exporters finding it tough to find containers in China
    * Container freight rates from China to various destinations
surge
    * Supply seen tight until coronavirus vaccines rolled out

    By Stella Qiu, Shivani Singh and Roslan Khasawneh
    BEIJING/SINGAPORE, Dec 10 (Reuters) - China's world-beating
economic rebound from the coronavirus pandemic is being blunted
by a global shortage of shipping containers, sending cargo costs
to record highs and hampering manufacturers in filling
fast-recovering global goods orders.
    Exports from China surged 21% in November from a year ago as
the country's mammoth industrial engine cranked out mountains of
appliances, toys, clothes, personal protective equipment and
other items currently in high demand around the world.
 urn:newsml:reuters.com:*:nL1N2IN04D
    But due to China's lopsided trade balance - exporting three
containers for every one imported recently - and delays in
containers returning to China due to the pandemic overseas, a
severe shortage is now starting to pinch export flows. Roughly
60% of global goods move by container, and according to United
Nations trade data there are close to 180 million containers
worldwide.
    "We have so many orders but just cannot ship things," said
Charles Xu, a mirror salesman in the export manufacturing hub of
Yiwu in Zhejiang province who supplies U.S. retailers such as
Walmart  WMT.N  and Home Depot  HD.N .
    "Boxes are piling up at our factory and we don't have much
space left. It's just hard to book containers, and everyone is
bidding for them with high prices," he said.
    Average container turnaround times have ballooned to 100
days from 60 days previously because of COVID-19-related
handling capacity cuts in Europe and the United States,
according to the China Container Industry Association (CCIA),
and that has exacerbated the shortage. U.S. importers already
reported problems with shipment delays in November.  urn:newsml:reuters.com:*:nL1N2I42M3
    The grounding of much of the global international passenger
air fleet - which often also carries cargo - has also boosted
demand for maritime freight.  urn:newsml:reuters.com:*:nL4N2I31FJ 
    With little change in prospect before coronavirus vaccines
are rolled out globally, changing the dynamics of trade and
freight, shipping rates have spiked as a result. The cost of
chartering a 40-foot container from China to the U.S. East Coast
scaled a record $4,928 this week, up 85% since June 1, according
to Freightos data in Refinitiv Eikon.  FREIGHTOS-CN-USEC  
    
    MAXED OUT
    Rates to Europe have jumped 142% over the same period, and
by 103% to the Mediterranean via the Suez Canal.
    The rates for some shorter-haul - and lower-margin - routes
have jumped by even more. The Ningbo Containerised Freight Index
from China to Singapore/Malaysia soared nearly 300% between
early October and early December as a bidding war for shipping
space broke out among Southeast Asian exporters.
    Container manufacturers have expanded shifts and boosted
capacity to try to keep up with demand, but are still falling
short. Monthly output in China - which accounts for 96% of
global production - hit a five-year high of 300,000 units in
September, according to CCIA data. 
    Output has stayed high since, but shortages of steel, floor
timber and qualified welders are seen capping further gains,
CCIA said. Unless exactly sized to precise specifications and
securely reinforced, containers risk splitting in the process of
being loaded aboard ships.  
    Distorted trade flows in and out of consumer markets which
are importing more and exporting less than normal due to the
pandemic have also led to a record build-up in containers
outside China. 
    The Port of Los Angeles, the top U.S. container port, 
imported 3.5 containers for every one it exported in October,
and shipped a record 326,000 empty containers that month,
according to shipping organisation BIMCO.
    
    'A MAFIA'
    Still, reduced overall outbound processing rates mean
suppliers across Asia continue to struggle securing passage for
their goods. 
    Sensing a profit-making opportunity, some private Chinese
firms have been stockpiling containers which are made available
to the highest bidder.
    "Now there is a mafia. You pay extra to get access to
containers from private yards, not shipping yards," said a
Yiwu-based vendor of household goods, toys and stationery.
    "Each container can cost 3,000 RMB, which is almost $500,
and the freight is already three times higher than normal.
Everyone's making money, but we aren't making money,” 
    "Right now waiting for container is two to four weeks. I
still don't know if I will have container or not," said the
vendor, who would not give his name as he was not authorised to
speak to media.
    Some lament they can't buy their way onto vessels, no matter
the price.
    "Sometimes, carriers won't book shipping space even when
you're paying them double," said a freight forwarder at
Ningbo-based Southwest Logistics Group. 
    "In the past, shipping rates on a container to South
America, for example, at most cost $3,000, and that's a sky-high
price. But now even if you're paying $6,000, shipping companies
can't guarantee your spot," said the official, who declined to
be named as he is not authorised to speak to media.
    
    PAY UP
    As a result, shipping associations in South Korea, Malaysia
and elsewhere have requested government support in offsetting
surging freight costs, while others are opting simply to try to
sell more goods at home.
    Still, others have little choice but to pay up.
    "Sometimes, it's just an endless wait until you run out of
patience and ask them 'how much do you want?'," said Hill Xiao,
who runs an export business in southern China's Guangdong
province that helps factories sell clothes and toys abroad.
    "If you can't get a container, you cannot ship things, and
you can't get the money. It really weighs on our cash flows,"
Hill said.
    Industry observers expect the container tightness to persist
until coronavirus vaccines are rolled out widely and more global
travel resumes.
    "We're seeing an unusually high demand for goods globally,
which is likely to cool as we move into 2021 because of the
(expected) service-led recovery, particularly in Western
economies," said Frederic Neumann, co-head of Asian Economics
Research at HSBC. 
    "At the same time, some of the logistical bottlenecks,
namely a lack of passenger aircraft that can carry cargo, should
ease as well once we have a vaccine rolled out."

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GRAPHIC-Container shipping costs surge to record highs    https://tmsnrt.rs/3mZvW6U
GRAPHIC-Container shipping costs fro China    https://tmsnrt.rs/3qJYMe2
GRAPHIC-China exports vs imports    https://tmsnrt.rs/371bbC8
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 (Reporting by Roslan Khasawneh in Singapore; Stella Qiu, Zhang
Min and Shivani Singh in Beijing; Lisa Baertlein in Los Angeles;
and Jonathan Saul in London; Editing by Gavin Maguire and
Kenneth Maxwell)
 ((roslan.khasawneh@thomsonreuters.com;))