Clogged supply chains to push up prices, experts say

Source: China Daily

Disruption to the shipping industry caused by port delays and higher container costs could continue into next year, impacting global trade and economic growth, and pushing up consumer prices, according to industry leaders.

A partial closure of the Ningbo-Zhoushan port in eastern China－one of the world's busiest cargo ports－last week due to a COVID-19 outbreak has added to the list of problems affecting supply chains.

Shipping costs from China and Southeast Asia to the east coast of the United States have hit record highs, according to global container freight index Freightos Baltic.

It said it now costs $15,800 to move a 40-foot (12.2-meter) container from China to the US west coast, which is a tenfold jump on pre-pandemic levels and up by half from last month.

Pandemic-related global shipping disruption began in the second half of last year, when a surge in container prices and container vessel delays at ports around the world caused knock-on effects as traders battled to recover costs.

Along with border restrictions and port worker absences, there was the Suez Canal blockage in March, when huge container ship Ever Given that carries cargo between Asia and Europe became stuck in the major shipping lane in Egypt for almost a week.

It forced vessels to wait for the canal to reopen, or take the much longer route around the southern tip of Africa. Then in May, there was further setback when a COVID-19 outbreak at Yantian terminal in Shenzhen forced it to partially close for three weeks.

The Ningbo-Zhoushan port closure threatens more turmoil for global trade ahead of the key Christmas shopping season and other holidays in Europe and the US, reported the Financial Times.

Lars Mikael Jensen, head of global ocean network at Maersk, the world's largest container shipping group, said the situation shows no sign of improvement since the Delta variant emerged.

"It's not getting any better on aggregate," he told the Financial Times. He added that maritime transport networks are "still super stretched, it only takes a small thing then you're back to square one or square one minus".

John Glen, chief economist of the Chartered Institute of Procurement & Supply, was quoted by the paper as saying that seasonal good shortages would drive inflation higher.

"Now is the critical point for supplies into Europe for the Christmas season," Glen said. "There is no short-term solution and the problem is not going away soon."

BBC business correspondent Theo Leggett said the industry is facing a "perfect storm" with "one blow after another", following the Ever Given blocking of the Suez Canal and port closures.

Jason Chiang from Ocean Shipping Consultants told the BBC that the global shipping industry is likely to feel the impact of the pandemic for several more months.

"We don't expect to see any new shipping capacity until two years down the road," he said. "So, everything between now and two years will be dependent on how the pandemic plays out."