Global Shipping Disrupted by COVID-19 Outbreak in China’s Southern Province

Surge in container freight rates causes Chinese businesses to cancel export orders

A cargo ship loaded with containers leaving a port in Haikou in China's southern Hainan province, on May 17, 2021. (STR/AFP via Getty Images)A cargo ship loaded with containers leaving a port in Haikou in China's southern Hainan province, on May 17, 2021. (STR/AFP via Getty Images)

The recent outbreak of COVID-19 in China’s southern province Guangdong has caused acute congestion at the region’s ports. Shipments have been delayed, which has severely disrupted global supply chains. Adding to that, the surge in the cost of sea freight from China since the end of last year has caused many Chinese companies to cancel export orders.

Since the sudden COVID-19 outbreak in the province in late May, operations at the terminals at the ports in Guangdong province, including in major port Yatian in Shenzhen, have been restricted due to the shutdown measures that the Chinese regime adopted to control the spread of the disease. It has caused severe congestion.

At Yatian alone, there are dozens of ships waiting outside the port for a berth to become available, holding up shipments and containers, according to a report by BBC.

A cargo ship carrying containers is seen near the Yantian port in Shenzhen, following the CCP virus outbreak, in Guangdong province, China, on May 17, 2020. (Martin Pollard/Reuters)

Global sea freight shipping costs have continued to rise in recent months, due to a shortage of containers and the disruptions since the pandemic. Since the third quarter of last year, the phenomenon of “lack of shipping containers” has spread in major ports in China, and at the same time, it has continued to push up the price of containers.

Year on year, the SCFI Index (the Shanghai Containerized Freight Index), a widely used index for sea freight rates for container transport from mainland China ports, showed a 282 percent increase for the week ending June 5. In the first half of June, the cost of a 40 TEU container from China’s eastern port Tianjin to the east coast of the United States was $14,000 to $16,000, while it has increased to $17,000 to $18,000 for the second half of June.

Zhou Ming, head of a foreign trade company in Tianjin, told Chinese media “it’s really out of control now.” He visited almost all shipping companies, but still couldn’t get shipping space, so he could only ask for help from a freight forwarding company at a very high price. And the price of a 40-foot container from Tianjin to the U.S. east coast will rise to $17,000 to $18,000 in late June. Some freight forwarders even asked for more than $20,000.

Zhou said, “The freight cost is now more than 60 [percent] of the value of our goods. Plus a 25 [percent] tariff, there is almost no profit at all.”

In addition, international shipping companies have increased various surcharges, including GRI. A general rate increase (GRI) is an adjustment of sea freight rates across all or specific trade routes during a set time frame, according to the industry definition.

French container shipping company CMA CGM has raised the GRI for routes from Asian ports to the United States and Canada starting on June 1.

Wanhai Shipping also said that due to the recent increase in operating costs, it will increase freight rates for goods exported from China to other parts of Asia.

Hapag-Lloyd recently announced that starting from June 15th, it will increase the GRI for eastbound routes from East Asia to the United States and Canada.

A truck transports a container to be loaded onto a ship at a port in Tianjin, China. (Alexander F. Yuan/AP Photo)

Zhou said the high cost of sea freight may become an unbearable burden for small and medium-sized foreign trade companies in China. He said some companies have given up export orders for the coming peak season.

American Chinese investment strategist and Chinese foreign trade expert Mike Sun said in an interview with The Epoch Times, “Due to the severe COVID-19 epidemic in Southeast Asia, especially India, many orders actually have gone to China.”

He said that a large number of orders should have been a good thing, “but because of the soaring container price, the transportation price has risen sharply, and a large number of goods are stuck in the ports, which has hit China’s foreign trade badly. Because Chinese foreign trade companies’ profits are actually about 6 [percent]. Such a large-scale increase in shipping fees is a big blow to Chinese companies.”

Sun also said that it’s the first time in his career that he has seen such a large increase in sea freight costs.

Ye Yifan contributed to the report.