Quickly deteriorating cargo flows thorough Southern China after congestion spread beyond pandemic-hit Yantian International Container Terminals is creating a scale of disruption greater than the six-day blockage of the Suez Canal in March.
With eastbound trans-Pacific demand outpacing vessel capacity and ocean reliability already below 25 percent on both China-US and China-Europe trades, supply chain executives and analysts warn of fast-widening disruption linked to Yantian.
“Shippers should not underestimate the magnitude of the coming ripple effects,” Lars Jensen, CEO of Vespucci Consulting and a JOC.com analyst, wrote in a LinkedIn post Tuesday.
Jensen estimated that Yantian has been unable to handle 357,000 TEU over the past 14 days of disruption. By way of context, he said the Suez Canal blockage lasted six days and affected a daily flow of 55,000 TEU, or some 330,000 TEU in total. Also needing to be factored in is the impact the Yantian congestion is having on the other Shenzhen terminals, where productivity is also being limited by COVID-19 measures.
“Every day increases the pile of backlogged cargo,” Jensen noted. “Once the ports re-open normal operations we should expect a surge of cargo – at least to the degree there are even vessels available to handle this. This in turn will cause ripples of potential congestion at the destination with a lag time of some two to five weeks.”
Yantian, one of the busiest deep-sea terminals in Shenzhen, handles 25 percent of China-US trade, according to HSBC Global Research, with 13.3 million TEU in total crossing its busy wharves in 2020. But following a COVID-19 outbreak on May 21, its west terminal was shut and productivity at the east terminal fell to 30 percent. In response, carriers have announced scores of Yantian cuts to their schedules up until the first week of July.
The 2M Alliance of Maersk and Mediterranean Shipping Co. (MSC) announced 40 vessels will omit calls at Yantian until July 5, while THE Alliance will cut 16 calls over the next four weeks, and 11 vessels from CMA CGM will drop Yantian up to June 19.
More than 40 vessels are believed to be currently waiting to enter the terminal. With export containers stacking up, and quarantine measures limiting the availability of truck drivers, the disruption is spreading through South China ports.
Data from visibility solutions provider FourKites shows dwell time increasing over the last two weeks at Yantian from five days in mid-May to eight days for the week of May 30. FourKites also noted a shipment volume drop of 44 percent and 39 percent during the weeks of May 23 and May 30, respectively, compared to the week of May 9.
No easy alternatives
Export containers and returning empties are rapidly stacking up, leaving shippers from the manufacturing hub of Guangdong Province in South China scrambling for alternatives.
“When the COVID-19 cases first broke out we estimated a week delay for our cargo with some rollovers, but now it will be at least three weeks and that is severe for promotional goods or cargo that has any urgency,” an Asia-Europe shipper based in Hong Kong told JOC.com Tuesday.
“It is simply complete chaos,” was the view of a European importer in Germany. “We are looking at Hong Kong as an option, or Nansha or Shekou.”
A spokesman for DB Schenker said the congestion was expected to last “at least for the rest of June,” with export cargo being redirected to alternative ports such as Nansha and Hong Kong. “The situation presents additional challenges to managing the space and equipment for the US market, which is already very tight,” the spokesman told JOC.com.
DHL Global Forwarding said in a statement it was also encouraging customers to divert shipments to the other Shenzhen terminals of Shekou or Chiwan, the Guangzhou terminal of Nansha, or Hong Kong “until the situation eases.”
Getting boxes into those alternative ports has become a challenge, however. Ports in South China are already operating at high levels of productivity because of sustained and heavy demand from US importers. The widening congestion in Shenzhen has seen terminals imposing drop-off and collection restrictions on containers, with Yantian, Shekou, and Chiwan only accepting laden boxes three days prior to the vessel departure. Nansha and Da Chan Bay require drop-off seven days before the vessel departure.
Forwarders said consigning cargo through Hong Kong had its own challenges, requiring clearance by both Hong Kong and China customs. And while barge services were available direct to Hong Kong’s Kwai Chung Container Terminal, cross-border trucking could only be carried out by Hong Kong–based drivers and trucks.
Further complicating a shift from Yantian to alternative South China terminals are tightening quarantine measures as COVID-19 infections spread. According to a SEKO Logistics update Tuesday, all drivers from high-risk areas are being quarantined for 14 days and can only enter Yantian after two negative tests.
Spot freight rates have already begun to react to the disruption. Since May 27 when the Yantian infections were detected, rates have risen by $251 per FEU on the South China-US West Coast to $4,725, and have increased by $350 per TEU to a record $5,435 on South China-Europe, according to rate benchmarking platform Xeneta. On top of the spot rates, carriers are also levying surcharges of up to $2,500 to guarantee space.
Maersk told customers in an advisory this week that Yantian yard density remains elevated with disinfection and quarantine measures being continuously implemented. “We expect continued terminal congestion and vessel delays upwards of 14 days,” the carrier noted.