Lockdowns in China and war in Ukraine congest the world’s main ports

The strictest lockdown in Shanghai, the Chinese metropolis and world financial center, has impacted global export chains with the congestion of ports in China and the rest of the world, but it should have more severe consequences for supply chains than the shock. brought in 2020 with the emergence of Covid-19, according to experts consulted by the CNN Brasil Business .

That’s because container ships are queuing for longer periods of time to dock at ports, which ends up overloading terminals and delaying deliveries everywhere in the world.

Currently, a fifth of the global container fleet is stuck in congestion at various ports, according to a report published by Royal Bank of Canada (RBC). There are more than 345 ships waiting to dock at the port of Shanghai, according to Mike Tran, responsible for the report.

“Supply chain bottlenecks are different today than they were six months ago. There are several versions of this, but basically, before they were very US-centric, the port of Long Beach. What we’re seeing now is that these bottlenecks are going global. The war between Russia and Ukraine has caused a lot of congestion in Europe, as well as the lockdowns in China on the Asian continent and, of course, the bottlenecks in the US remain”, said Michael Tran, to CNN Brasil Business .

RBC’s director of global strategy said the study considered the current situation of the world’s 22 largest ports. No Latin American ports were part of the survey, but Michael Tran pointed out that the impacts of bottlenecks in supply chains affect everyone who does business with China.

“China represents 12% of world trade. So if goods get stuck in China, they won’t reach major consumers. Also, if a ship starts taking longer to reach its destination on its voyage, that causes a big inflationary problem”, he pointed out.

Mark Juzwiak, director of Institutional Relations at Maersk Group, the world’s largest container ship operator, said the lockdowns in China had precipitated a ripple effect, reducing global container turnover.

“I would say that there is no shortage of containers, but a much lower turnover of them. Previously, we used to make 4 or 5 trips a year to China, but because of delays we are only doing two trips taking the containers in and out,” he declared.

Juzwiak explained that a sea voyage to the Chinese coast takes an average of 40 days to complete in normal situations, but the queue of ships in Asian ports causes delays in return trips.

According to him, the Chinese “Covid zero” policy interrupted the progress made in 2021 and at the beginning of 2022 in the resumption of export economic activity, and the impacts caused should be stronger from the second half of this year, with the consequences being felt. until 2023.

“The second semester usually has a volume of cargo between 15% and 20% higher, due to the end of the year parties, the commemorative dates around the world that move the economy a lot. Therefore, I believe that even if the epidemiological situation improves in China by the second half of the year, we will still see a very high demand environment, but it will not normalize quickly,” he said.

global inflation

Another highlight that is causing difficulties for maritime trade at the moment is the high costs, according to Mark Juzwiak. The price of bunker, the fuel used on ships, has risen from $200 a liter in July 2020 to more than $900 today.

“Transport fuels represent more than 50% of shipping costs. So, going up fuels, there will be an increase in the price of goods naturally,” he said.

Mike Tran of the Royal Bank of Canada pointed out that high fuel costs are likely to drive up the cost of shipping worldwide.

“Global trade lifelines are becoming more and more expensive. So I think that’s important, it’s fundamental to how we think about the problem at hand, how much longer it’s going to last. The greater the likelihood of upward pressure on everything the consumer buys, the greater the amounts he will pay,” he added.

Impact on Brazilian imports

Experts noted that Brazil is likely to feel strong impacts on imports with bottlenecks in global supply chains. Mark Juzwiak pointed out that the arrival of inputs from China is a problem, as the high demand and the difficulty of cargo operation means that the containers do not arrive 100% filled with inputs.

“The ships in China does not have containers available to ship, so they arrive with 80% of the occupancy here, while for export they are always full”, he pointed out.

Marcus Quintella, director of FGV Transportes, and Leonardo Trevisan, professor of international geoeconomics at ESPM, spoke about Brazil’s role in global trade and the business relationship with the Chinese, which cannot meet global demand at the moment.

“Brazil’s problem is that we only account for 1% of the world’s containers, importing much more than exporting. The country suffers a lot from this and from the high freight rates”, highlighted Quintella. “It’s almost a trade. one-way international, today there is a lack of chips for the automobile industry and other products”, he added.

“We have a mistaken idea that we only export to China, but that’s not quite the case. We import several Chinese inputs present in our daily lives. Without these imports, we will not have the necessary inputs for the medicines we buy in pharmacies, for example,” added Trevisan.

As analyzed by Juzwiak, despite Brazil feeling the impacts of bottlenecks in the supply chain, the situation is more worrying in the US, Europe and China.

“Europe is facing the consequences of the war in Eastern Europe and China is facing the effects of lockdowns in important cities, while in the US there are still goods that Americans bought in October for the end of the year that have not yet arrived, are paralyzed. Transport in Brazil has not stopped since the beginning of the pandemic,” he said.

Maersk reports that “the condition of the reefer terminals has gradually improved, allowing us to resume cargo bookings, with the first shipments arriving in Shanghai from 26 June.”

The company said yard container handling and ships coming in and out of terminals at the port of Shanghai are “fully operational” and that it is already starting to see more collection of empty containers for loading and more imports leaving the port.

“We continue to work closely with our customers and partners, seeking alternative solutions, including multimodal services between Shanghai and nearby cities, and preparing for the coming months as things move towards a state of normality. The situation remains fluid in other parts of China and we continue to assess the situation daily,” Maersk said in a statement.

“The situation in Brazil is currently normal, but although Chinese ports are open, the lockdown in China has led to a shortage of trucks and closed factories, which could lead to a volume of shipments beyond normal in the coming months,” he concluded.

THE CNN Brasil Business also contacted the Mediterranean Shipping Company (MSC) group, which said it would not comment on the matter.