Adam Hill: Chinese Port Closure Pattern Developing in Contrast with U.S.
Just as the industry recovers from one Chinese port closure, shippers face more delays from the closure of another. Scarbrough President and COO Adam Hill cites a developing pattern that magnifies the effects of differing COVID-19 protocols between U.S. and Chinese ports.
“China is very stop-and-go,” Hill said. “A zero-tolerance COVID policy means China will abruptly shut down a port for a week then come back full speed to process everything.”
“The U.S. just tries to keep moving at whatever pace it can despite the constant shorthandedness caused by the pandemic.”
Back-to-Back Chinese Port Closures to Worsen Stateside Congestion
Shippers first felt the effects of China’s COVID-19 policy after the partial closure of the Yantian container terminal. According to many accounts, the month-long stall created even more delays and disruptions than the Suez Canal blockage. The industry is now catching up on delayed Yantian containers, Hill said. And ports like Los Angeles and Long Beach are seeing worsening congestion as a result.
“I think what we’re going to see is another big backlog in LA,” Hill said. “They’ve worked their way down from the previous congestion peak, but with the uptick that’s coming in from Yantian along with traditional peak season things are bound to get worse.”
But just as ports have started to process the Yantian backlog, another Chinese port has partially closed. Authorities detected a single positive coronavirus test among port workers and chose to shut the affected terminal. The closure happened to occur at Ningbo, the third-busiest port in the world behind Shanghai and Singapore. Even its 25 percent reduction in productivity threatens to create similar delays to the Yantian event.
Stop-And-Go Pattern Emerging
Hill points to a developing pattern of abrupt closures and rapid re-openings that shippers should expect out of China.
“It’s just a completely different approach from the U.S.,” Hill said. “As soon as something is detected, everything shuts down immediately. That’s where we have to start looking at what that impact potentially looks like downstream in the U.S. where our ports keep working at limited capacity during our long, slow churn of COVID.”
“The snowball effect will continue to pick up as our ports keep catching up from closures across the Pacific.”
Shippers Pushing Back
Trans-pacific container rates have soared over the past year, and the port closures have only worsened the situation. Air freight capacity has dried up simultaneously as authorities have closed airports to contain coronavirus outbreaks. Shippers are left with few options, as Hill explains.
Hill argues that as Chinese port closure occurrences shrink capacity and spike rates, companies will prioritize shipping fast-moving and high-margin goods and store less-valuable goods back in Asia until the situation normalizes.
“They’re seeing that it may not make sense anymore to move certain items in the current situation,” Hill said. “It might make sense with low-margin or slow-moving inventory just to leave it in Asia for the time being.”
Adam will continue to share his thoughts and perspectives here monthly. Follow The Scarbrough Group on social media or subscribe to our newsletter for regular updates.