Weaker international demand for Chinese goods has led to the cancellation of shipments at the country’s largest port, undermining the economic boost expected from the zero-Covid policy.
industry participants in China show an increase in “empty sailings”, where operators miss ports because there is not enough cargo to pick up or they fear delays.
While cancellations are typical in the industry and usually increase during the lunar new year, supply chain data provider Drewry said the rate was “significantly up” this year, due to a drop in demand in the West. China’s exports have fallen for three months in a row, undermining a key pillar of its struggling economic model.
The cancellation rate for ships traveling east from Asia across the Pacific or to Europe will reach 31 percent in the coming weeks, compared with 23 percent at the same time last year and 16 percent in 2021, Drewry said.
In addition to weak demand, fewer deliveries could be made after hundreds of millions of Covid-19 cases over the past month added to pressure on the country’s supply chain, leading to staff shortages and factory closures.
“What’s happening in the shipping market as the virus spreads everywhere in China . . . is worse than the worst projections,” said Mark Young, chief executive of Shanghai-based Asia Pacific Maritime, which has a fleet of dozens of ships.
“The market has many empty ships but less cargo ready to be shipped,” he said, comparing the situation to the start of the Covid-19 pandemic in early 2020.
China’s infrastructure connecting factories and ports has spent three years under a strict zero-Covid regime that requires frequent quarantines for personnel and “closed-loop” operations. The policy led to delays and cancellations, but exports surged during that period as demand for goods increased.
Simon Sundboell, founder and chief executive of data provider eeSea, said the nature of the disruption had now changed, from a scenario driven by delays in a “hot market” to one of weaker demand.
“The industry is slowly getting back to normal and you have to cancel more because demand is down,” he said. “Last year, it was because of all these massive delays.”
One Shanghai-based manufacturer who asked to remain anonymous said the carrier “didn’t enter the port due to lack of volume”. He added that falling demand “resulted in shipping lanes reducing the number of vessels in circulation”.
Jan Dieleman, head of Cargill Ocean Transportation, said the coronavirus outbreak “absolutely” contributed to the increase in empty ships. Commodity shipping groups have not canceled shipments but have reduced coal shipments to China in recent months, due to seasonal changes.
Young said Asia Pacific Maritime has been forced to cancel sailing to the port on the Changjiang River to collect steel-related cargo because the factory could not produce on time. They expect to send another ship to collect within a month.
Empty sailings have increased globally over the past year against the backdrop of a weakening economy. In China, the first nationwide outbreak of the coronavirus coincided with the construction of the lunar new year. Maersk, the Danish container shipping company, said demand could be “expected to be volatile due to holiday closures in China combined with the Covid situation and inventory corrections in the US and Europe”.
Anne-Sophie Zerlang Karlsen, head of ocean operations for Asia-Pacific at Maersk, however suggested that the wider relaxation of Covid-19 measures is “a very positive development that has the potential to lift the Chinese economy significantly”.
Cargill’s Dieleman said the shipping industry is now relying on a rebound in economic activity. “People think that’s the first thing [Covid-19] the wave will go, “he said. “There is a stimulus from the government. So people are starting to become bullish.