The Covid-19 outbreak in the Yantian port area in Shenzhen and nearby Guangzhou continues to cause significant disruption and delays to sailings.
The Covid outbreak in South China is continuing to cause disruption to planned sailings, on top of a market already challenged. Authorities have imposed prevention and restriction measures in the region which has resulted in tightened controls at ports including disinfection and quarantine measures. Carriers have responded to the disruptions by bypassing Yantian and nearby Shenzhen port Shekou, instead switching to call at Nansha port in Guangzhou or Hong Kong. This has had the knock on effect of creating congestion in these ports as well. The number of schedule changes and port omissions continues to challenge schedule reliability. Landside services are also being impacted with access across the region being restricted causing delays with the transportation of cargo by road.
Last week we reported that the productivity rate of Yantian port had been reduced to 25% due to the response to the outbreak. We have heard that productivity is expected to rise to 40% next week showing signs of improvement. While it is good news that productivity is improving as more of the port’s labour force return to work, there will be a significant accumulation of vessels to call. With a large number of vessels waiting to berth due to disruptions at the various ports, the backlog is not expected to be cleared until the end of July.
Container availability in the affected ports has worsened as there has been a reduction in incoming containers to Yantian, Shekou and Nansha as shipping lines miss port calls. As well as the omitted loading of export containers, the port omissions mean empty equipment onboard the diverted ships will not be released to replenish container supplies at terminals. The consequence of this is further long delays to export cargo and higher prices for the use of container equipment.
The crisis has already resulted in further driving climbing shipping rates within China. The severity of the situation is reflected in the rate indexes which rose significantly last week as the situation escalated. The Shanghai Containerized Index remains at a similar high rate this week. We expect that freight rates are likely to stay high, especially as the situation in South China adds to the pressure for space and equipment shortages in the market.
For the coming weeks we expect that this situation will continue to cause delays and disruption to sailing schedules. With the proportion of vessels affected already greater than during the blockage of the Suez Canal in March and April, it is likely that the Yantian lockdown will have a much larger impact upon the global supply chain than the Suez incident. We expect that exports out of China will be severely impacted as containers sit in South China for weeks with little access to vessels.
We will keep customers updated with further news at the earliest opportunity.