Challenging Times For Freight & Container Shipping From China

It looks like being another challenging month in the world of international freight and container shipping from China especially.

Demand continues to exceed supply and this means there is a shortage of both ship capacity and also containers to load on ships.  COVID restrictions also mean that many ports are operating at around 80% capacity. This means a perfect storm has developed.

This situation will only ease when there is more capacity in the market, principally by the building of new ships and also containers, a project which is ongoing and in the case of ship especially, a long term proposition.

Shipping Port Capacity

Yantian port has been more or less closed due to a Covid outbreak from mid-June and this had a knock-on effect on the surrounding ports. The other main ones in the area being Nansha and Shekou.

These are now operating at above 100% capacity which has then degraded their level of service. This has meant the Pearl Delta area has had even more acute problems. Hopefully, it will be back to normal business in this area by the second week in August.

On a general note, the question we are constantly being asked is when will container shipping go back to being normal?  The answer is container shipping going back to where it was in early 2020 seems hardly likely in the short and medium-term.

Throughout the COVID pandemic, container shipping has increased by up to 29% in the Chinese main ports. The current belief is that as COVID restrictions ease, consumers will revert to spending on hospitality services, reducing demand for shipping from China.

However, to date, this is simply not happening. The high freight shipping rates are also seemingly not affecting the volume of purchases from the far east.

Airfreight Shipping

The airfreight market is rather more benign. Rates are quite stable at present and we do not know if additional passenger aircraft in use will create more cargo capacity in time for the autumn peak season, or whether demand will exceed supply as some cargo transfers from sea to air.

Rail Shipping

The Asia – Europe rail service is inextricably linked with the container shipping market. It comes as no surprise that there has been a surge in demand and a surge in rates as the operators pitch their prices somewhat above the prevailing container shipping prices.

Note that the same train does not travel from Asia to Europe all the way through. There are several changes of train on route due to gauge and track restrictions.

At each of these transhipment points backlogs have built up due to overbooking and so the transit time is typically several weeks longer than published. This has the effect of eroding the advantage of paying more to send a container by train, only to find that due to un-anticipated and un-advised backlogs the train service is no quicker in overall transit time.