With China preparing to reopen, global trade levels remain steady

As China takes steps to begin reopening its economy, which has been shut down over the last several weeks and created myriad issues and concerns for the global supply chain, a full return to normal does not appear to be imminent, according to various reports.

AWall Street Journalreport observed that Shanghai’s government has been taking steps to prepare for reopening, in an effort to “mitigate the damage created by lockdowns and factory closures on China’s economy,” citing a report in China’s state-run Economic Daily that roughly half of the city’s manufacturers have resumed operations, with the caveat that “a return to full capacity is likely some ways off.” And the WSJ report added that it will take some time to clear the backlog at the country’s ports and freight forwarding centers, which “has had a ripple effect across the global economy.”

Spencer Shute, a senior consultant for Proxima, a Chicago-based strategic team of procurement specialists, recently noted that West Coast ports are likely to be the ones most impacted by the Shanghai lockdowns, with the caveat that all ports will be affected at some level.

“Some shippers will try to ship to the East Coast to avoid the bottlenecks in LA/Long Beach,” said Shute. “With the limited air freight options in Shanghai throughout the lockdown, all air freight ports will expect to be inundated with increased volume in an attempt to fulfill backlogged demand. The downstream effects of this lockdown are shaping up to have an even larger impact on U.S. ports than anything else experienced during the pandemic.”

Port of Los Angeles Executive Director Gene Seroka had a different take, saying on the port’s recent monthly media call that despite the current challenges in China, cargo is still finding its way out of ports throughout central China, saying that so far that POLA has seen no dramatic change in the number of vessels leaving China since the lockdowns went into effect in Shanghai more than seven weeks ago.

“The number of container vessels headed towards San Pedro Bay has not changed that much,” he said, citing how, for the week of May 2, there were 46 departures, which is pretty consistent in showing that cargo is still coming.

And while there are impacts being seen from subassembly to manufacturing through delivery in central China, Seroka noted that the Transpacific trade is holding steady.

“Although conditions could change, I don’t see a bust coming anytime soon,” he said. “More likely…we may see a lull in volume with a fairly quick bounce back when the lockdowns end. There is no evidence of that just yet.”

While Seroka noted that outbound China cargo is continuing to get to the U.S., Echo Global Logistics CEO Doug Waggoner told LM that when more boats start coming back from China, it could lead to a repeat of 2020, in the form of a huge backlog at the ports and not enough trucks on the West Coast to move all the freight.

“Getting those trucks there will disrupt the national network and cause shortages elsewhere…and we will be right back in the situation that we have been in for the last couple of years,” he said.

Waggoner explained that during Covid inventories were drawn down, and there was what he called a double-whammy of companies having to restock their inventories and those that were coming from China were stuck in San Pedro Bay.

“Since then, inventories have been built back up again, but with [less] freight coming into the West Coast, you can assume that those inventories are getting burned off,” he said. “We are really kind of replaying 2020, I believe. We are not working with shippers on that, for the most part, because I don’t think everyone necessarily shares my opinion or it is not in plain sight yet. I think what we are seeing a lot of is shippers are seeing falling rates, and they are trying to take advantage of that and lock in new contract rates. But the problem is they are locking in lower contract rates, but then if rates shoot back up again, they are going to have a lot of tender rejections.”

Data provided toLMby Chicago-based FourKites, a provider of real-time tracking and visibility solutions across transportation modes and digital platforms, noted that ocean shipment volume, for both imports and exports, at ports across China showed that there has been a decline since peaking in mid-April.

它补充说,在上海港口,14 -day average ocean shipment volume was down 29% as of May 9 compared to March 12 (the day before lockdowns began going into effect). What’s more, it said that volume through other ports in China declined as well, with the 14-day average ocean shipment volume at the Port of Shenzhen, Port of Hong Kong, and Port of Ningbo-Zhoushan decreasing by 17%, 18%, and 20% week-over-week respectively.

FourKites also observed that for ocean shipments traveling from China to the U.S., average transit times from origin to the final destination are at a high since the start of 2021, with the 28-day average transit time for these shipments at 72.2 days, up 29% compared to March 12th and up 127% compared to the same time last year, with the 28-day average transit speed through the length of journey at 4.5 miles per hour, down 24% compared to March 12.