‘Chaos’ awaits peak season shipping

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Pudong Shanghai
China's newly announced live-fire drills on Bohai Sea and the Yellow Sea are expected to cause potential substantial disruption to trade in the region. Photo from Pudong Shanghai
  • ‘Chaos’ awaits peak season shipping
  • Forwarders, traders, and shippers expect more disruption in the 2022 third-quarter peak season than in 2021, based on a survey by Container xChange
  • Although many organized international shipments early this year, the majority continues to rely on the spot freight market
  • Cargo backlogs rise as China COVID lockdowns limit exports to Europe and US  

Chaos awaits peak season shipping this year as more than half of forwarders, traders and shippers asked in a new survey said COVID lockdowns in China had hampered their production and shipping plans.

Results of the survey by Container xChange, a marketplace and technology infrastructure provider for container logistics firms, suggest cargo backlogs and unsatisfied demand are building as China’s zero COVID strategy limits exports to Europe and the US.

Questions for the survey, titled “xChange Industry Pulse Survey,” were posed to about 200 players in the container logistics industry.

Replies showed 51% of the respondents expect the 2022 peak season to be “worse” than last year while 26% said it would be less chaotic and 22% expected the same level of chaos as in 2021.

The peak container shipping season traditionally occurs in the third quarter of each year as retailers build up inventories ahead of the fourth quarter holiday and shopping season.

Last year, cargo surges led to record-high container shipping freight rates, delivery delays, port congestion, and doubts on reliability of container shipping services.

In terms of container sourcing strategy in 2022 as compared with pre-pandemic times, 56% of the respondents said they had been “growing networks”, 38% replied they had agreed to “long-term contracts,” and 25% said they had followed a “multi-tender strategy”.

Of those polled, 37.5% responded they were ensuring clients received enough inventory by “shipping early” in 2022 while 25% said they were “using alternative shipment routes” and 18.8% replied they were contracting long-term slot agreements with carriers.

“Surprisingly, 62.5% said they were still relying on the spot market or doing nothing specific to ensure shipments reach clients,” xChange said in a press release on the survey.

The ongoing lockdowns in China’s commercial and industrial hub Shanghai and other manufacturing centers in the country weigh heavily on trade, the survey results showed.

Some 58% of respondents said the lockdowns had made it “hard to produce/ship as much products as planned,” suggesting a build-up of cargo backlogs and unsatisfied demand as exports to Europe and the US are constrained by the pandemic restrictions.

“Predicting exactly what will happen in this year’s peak season is harder than normal because there are so many contradictory signs and intangibles,” said Christian Roeloffs, co-founder and chief executive of Container xChange.

Roeloffs said the lockdowns have affected the availability of cargo for export to key markets in Europe and North America. One big question is whether China will sacrifice its zero COVID-19 policy to get trade and its economy moving again, he said.

“If it does, then there’s every sign that we’ll see a substantial surge as backlogs of exports are shipped,” Roeloffs said.

“If lockdown rules are relaxed soon and truckers are allowed to get back to work, then those backlogs will be arriving at the same time as peak season orders, which could cause a lot of supply chain blockages at ports in Europe and the US where congestion is already widespread.”

Roeloffs said there are very few indicators that President Xi Jinping will compromise health policy to boost trade. He added it might not be politically expedient for Xi to do so ahead of the Chinese Communist Party National People’s Congress later this year, when he is expected to be endorsed for a third term.

“The other side of this coin is demand, of course. Whether it is GDP forecasts, Purchasing Managers’ Index numbers, rising inflation or consumer confidence, multiple metrics suggest demand could be deflating. That could help offset any sudden rush of cargo from China, especially when there are also signs that consumers are spending more on services instead of products.”

Top challenges identified by respondents aside from China’s lockdowns were container availability, depots being full, inflation, the Russia-Ukraine crisis and rising prices.