Recent COVID-19 outbreaks in Shanghai, Beijing and other large cities in China have resulted in mass testing, residential lockdowns, closures of schools, businesses and suspension of public transport. Restrictions have markedly impacted international business. China’s latest economic data show the lowest GDP growth expectation in 30 years, rising unemployment, and slowing industrial production – due in part to the strict lockdowns.
As we have been reporting over the past couple of months, shipping congestion in China has gone from bad to worse as a result of the CCP’s “zero tolerance” to Covid.
In Shanghai, forwarders say the main bottleneck continues to be the lack of trucking capacity, nearly five weeks after the lockdown began. Trucking is still subject to daily PCR tests for drivers and and local road permits are required to enter the cities in the strategically important province of Jiangsu directly to the north. To make it more complicated, those local permits must be applied by local manufacturers – they can’t be done by an agent or the trucker.
But supply chain delays are caused by deeper issues than trucking and vessel sailings. Trade had already been backed up before the latest Covid scare caused China to lock down. Looking back over the past twelve months, we have seen the Chinese power crisis, shortages of containers and pallets used for loading cargo, along with the high number of typhoons (such as Kompasu) during the last season.
International trade and shipping is a two-way channel, and as a knock-on effect of the bottlenecks overseas, Australian exporters will also be feeling the pinch.
A report by the ABC last week looked at the outcomes that will flow on to our wool exporters. Shanghai is one of the most important ports in the world for the Australian wool trade. All the wool that goes to China when it’s shipped out of Australia is paid for when it leaves. So, if it’s stuck on a vessel outside of Shanghai, it’s actually not Australia’s problem.
In the ABC interview, Australian Council of Wool Exporters and Processors president Josh Lamb said the problem was not just that wool was stuck on ships. “What it does do is that it affects mills that we sell our wool to, it affects their cash flow, so we won’t be able to do new business with those clients until the wool gets there,” he said. The industry had already been dealing with logistics problems and he had thought some relief would arrive in 2023 before the latest hiccup. “We’re now starting to hear it could be 2024 [until that relief],” Mr Lamb said.
The Chinese government has vowed to act to help supply chains return to normal and the container shipping industry could see a very strong pickup from later this month as the Covid situation eases. This could eventually lead to a sudden surge in export cargo, analysts predict.
For more information about all matters concerning international shipping and trade, contact us here at Colless Young. As licensed Customs Brokers and International Freight Forwarders we offer correct, professional advice on all your import and export trade transactions. We are based in Brisbane and provide a complete range of logistics services, for both airfreight and sea cargo through all Australian ports and airports.
