The dramatic shift in exporting goods to the West is causing havoc within the shipping industry, and shipping delays and rising costs are creating huge issues for the very companies that are fuelling the economic recovery.
According to an article in the Wall Street Journal, the surge in the demand of shipped goods has outpaced the capacity of the global shipping industry overall. This has caused Chinese exporters to pay much higher rates but also struggling to find containers for their goods. Also adding to the problems is the time consuming pandemic related safety measures which has lowered efficiency at ports, causing containers to become stuck all over the world.
Chen Yang, who runs a textile trading unit at a state-owned enterprise in the southern city of Hefei, said the business, which mostly exports to the U.S., has weathered the pandemic and the China-U.S. trade war, but he expected to lose money in 2020 in part because of a sharp rise in shipping costs. A 40-foot container arriving at the port of Charleston, S.C., in December cost Mr. Yang around $7,500, up from $2,700 in April, he said. He also has to book space on the vessel at least 20 days in advance, more than double the usual time.
“I have never seen anything like this in my 18 years of experience as an exporter,” said Mr. Yang. “We’ve been operating at a loss since August.”
The logistics challenges are also prompting some exporters to rethink their supply chains. Shenzhen Xuewu Technology Co., an e-cigarette producer based in the southern Chinese city of Shenzhen, sells mostly to consumers abroad. While 90% of its vaping products are shipped by air, those rates had risen by about 30% in December compared with a year earlier, with the shortage of shipping containers forcing more exporters to send their goods by air, said Fiona Fu, who leads the company’s overseas logistics. Logistics costs now account for about 5% of the company’s overall costs, up from 1% to 2% before the pandemic, she said.
Another issue is the rapid appreciation of currency. The yuan, which has risen more than 8% against the U.S dollar in the past six months, is also reducing profit margins for Chinese traders, most of whom still accept payments in U.S. Dollars.
Whilst the rise in costs may still be an issue for exporters, we hope to see some relief to ports as most factories will close for a 2 week period for the Lunar New Year which should give a good break for things to get back to some sort of normal.
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Reference - Wall Street Journal Reference - https://www.google.co.uk/amp/s/www.wsj.com/amp/articles/covid-19-shipping-problems-squeeze-chinas-exporters-11609675204