Shanghai port

China supply chain pressures relentless

May 6, 2022 | , , ,

Despite talk of restarting manufacturing and a tiered reopening of Shanghai and the surrounding province, the situation remains challenging and delays are increasing in Ningbo as the volume of cargo diverted from Shanghai continues to grow.

The Shanghai lockdown remains for a fifth week, with offices, workplaces, and public transport closed. Airport and container terminals remain operating, though restricted by the availability of transport to deliver and remove cargo, along with manpower and access issues caused by the current related restrictions.

Drivers are still subject to daily PCR testing (with additional ad-hoc testing imposed at short notice) and Shanghai and local road permits are required to enter cities in Jiangsu province and the local permit must be applied by the exporter, it can’t be the agent or haulier.

A number of major airlines continue to serve Shanghai, but restrictions limiting transport to and from the airport mean that cargo is diverting to other airports in the region and beyond.

The current issues look likely to remain until mid-May, at the earliest. In the meantime our team are re-routing cargo where it is possible and cost-effective, ensuring all available options are utilised.

Shanghai container terminals, in Waigaoqiao and Yangshan, operate as normal, but again they are affected by local transport availability and terminal handling capacity is limited due to availability of workers and COVID-safe working.

The situation is being further impacted by blanked sailings, delays, and longer waiting times, though the availability of ISO tank containers is improving and some carriers have lifted a stop on bookings for dangerous goods cargoes.

When transport can be allocated we continue to move FCL cargo through Shanghai ports, with the option of diversion, when appropriate. Though with increasing quantities of cargo diverting from Shanghai and Zhejiang province, Ningbo has become very congested and the announced blank sailings will very likely worsen the situation.

With Beijing expected to be the next major lockdown area, Shanghai is unlikely to see any relaxation of the rules and the "zero-virus’’ approach is likely to be pursued until the very end, which could be throughout the rest of 2022 in some form.

Guangzhou is on the COVID watch list, with the city’s airport, which has been handling large volumes of cargo diverted from Shanghai, cancelling all domestic flights due to suspected cases.

Local areas in Shenzhen are operating under different measures with factories and offices open or closed, based on the local conditions. Air and ocean facilities are operating, but the situation for local transport capacity and availability varies and drivers require a cleared 24 hours PCR test. The situation is very dynamic and changing daily with localised interpretations of regulations and requirements.

Cross-border trucking between China and Hong Kong is still struggling with capacity limitations due to long waiting times for control and restrictions. Large volumes of cross-border traffic continues to be transported by feeder services.

Reduced land-side trucking capacity continues to be a limiting factor, with significantly reduced capacity available for cargo collections and deliveries, which means factories may not meet planned delivery schedules.

We will continue to closely monitor the situation and update you as changes occur, but we do recommend checking with your vendors, to clarify the status of your orders, and whether they have actually been manufactured.

When China does begin to lift lockdowns it is not inconceivable that the manufacturing bounce-back could happen within weeks, as the government will be very focused on getting production up and running again. It is widely understood that this could have a serious impact, particularly if it coincides with the start of the traditional ‘peak season’. Spot/ FAK rates are expected to head north very quickly, as demand returns through product being made and logistics loosening up internally, within China’s transport systems.

We hope to see supply chains start to flow freely again quickly, as the pent-up demand for delayed goods could quickly create congestion, if operations are not running optimally. With the long term fixed price and capacity agreements we have in place with our partner carriers we are well positioned to continue to deliver resilient, consistent and reliable supply chain movements throughout the year. This has been our recommended model during the pandemic and continued challenges experienced over recent months.

Metro’s cloud-based supply chain management platform, MVT, simplifies the most demanding global trading regimes, by making every milestone and participant in the supply chain transparent and controllable, down to individual SKU level. 

To discuss how our technology could support your supply chain, please contact Simon George our Technical Solutions Director or Elliot Carlile.

Pallets

Ukraine invasion drives timber prices up and pallet supply down

May 6, 2022 | , ,

The European Pallet Association (EPAL) and the European Federation of Wooden Pallet and Packaging Manufacturers (FEFPEB) have warned of a shortage of wooden pallets and packaging that is already being felt.

The war in Ukraine and the shutdown of production is having serious consequences for European pallet manufacturers, with packaging prices increasing, as evidenced by a French trade association who confirm that pallet prices have risen from €7 to €29, an increase of >400% increase.

The associations said that pallets are increasingly difficult to find and more expensive to produce in a context of soaring raw material costs and in particular the price of wood.

Pallets are critical components in the global transportation, because they are the common interface for every stage - handling, shipping, trucks, forklifts - and make the supply chain work. They have become a key component of transport and warehousing especially over the last few decades and are an essential tool to  industry. What you see in your local supermarket on a shelf has invariably been on at least one pallet in its movement, and usually several.

Without pallets, supply chains would revert to handling one box at a time, which is the way cargo moved, before the pallet was introduced over a hundred years ago.

Ukraine exported over 2.7 million m³ of lumber last year, a significant part of which was used for the production of wooden pallets and packaging in Europe, while Ukraine also independently produced and exported to European states about 15 million of its own locally manufactured pallets.

In addition to stopping deliveries from Ukraine, the wooden pallet and packaging market will also face difficulties with imports from the Russian Federation and Belarus, which annually supplied about 7.6 million m³ of lumber to the EU – that’s a huge amount of timber boards to be extracted from the supply chain.

Alternative suppliers from Scandinavia, Germany and the Baltic countries are currently not yet able to fully cover the possible shortage.

The result, for companies further down the line, is a sudden rise in pallet prices and the risk of running out of a product that’s often overlooked yet essential to supply chains, as it allows businesses to stack goods and transport them efficiently with reduced loading time. This affects all modes of transport, from high value electronic goods by air freight, through to foodstuffs by truck. Something to be aware of, that will add to the cost of goods.

To discuss your packaging and pallet requirements, please contact our export team, who can take you through your options and solutions. If you are seeing a shortfall in supply from current suppliers of pallets we have a network to recommend and assist with, what will hopefully be, a short term challenge that will often not be considered as a problem.

Dover queue 2

EU/UK border controls set for July put back again

May 6, 2022 | , ,

The UK government has again delayed the introduction of further border controls on goods from the EU, due for implementation from July, pushing them back until the end of 2023, suggesting it did not want to add more costs at a time of fast-rising inflation.

New import controls, including on EU food products, due to begin in July of this year, have been put back for a fourth time, with the government saying "it would be wrong to impose new administrative burdens and risk disruption at ports" at a time of higher costs due to the war in Ukraine and rising energy prices.

The government said. “British businesses and people going about their daily lives are being hit by rising costs caused by Russia’s war in Ukraine and in energy prices. It would therefore be wrong to impose new administrative burdens and risk disruption at ports and to supply chains at this point. The remaining import controls on EU goods will no longer be introduced this year - saving British businesses up to £1 billion in annual costs.”

Port operators, many of whom have already built border control posts, have reacted angrily, saying the government’s announcement is a major policy change and that the facilities could become redundant, wasting millions of pounds of public and private funding.

Specifically, the following controls which were planned for introduction from July 2022 will now not be introduced:

•   Safety and security declarations on EU imports

•   Health certification and SPS checks for EU imports

•   Prohibitions and restrictions on the import of chilled meats from the EU

•   Sanitary and Phytosanitary (SPS) checks on EU imports currently at destination to be moved to Border Control Post (BCP)

Current import controls on EU goods will stay in place and traders will continue to move their goods from the EU to GB as they do now:

•   Import Customs Declaration

•   GVMS declaration

•   Pre-notification into IPAFFS for POAP, Live animals, Plant Products

The government’s statement confirmed that no further import controls on EU goods will be introduced this year and that businesses can stop their preparations for July now. In many ways this can be  considered a good thing that is positive for business; in other ways just further delays that will occur at some point that will need to be addressed.

They will now publish a Target Operating Model in the Autumn that will set out the new regime of border import controls and will target the end of 2023 as the revised introduction date for the control’s regime.

Metro are at the forefront of delivering EU customs brokerage solutions, with our automated CuDoS declaration platform and a dedicated team of over 40 customs experts.

Now available to new customers, our CuDoS customs brokerage platform is optimised continuously, in line with the regimes in force on both sides of the Channel.

Automating and submitting customs declarations and associated paperwork, CuDoS simplifies compliant border processing, in either direction. 

To discuss your situation and to learn how we automate customs declarations for businesses of all sizes, please contact Elliot Carlile to talk through the options. 

Shanghai port

Blanked Shanghai sailings slow to materialise

Apr 21, 2022 | , , ,

As Shanghai enters the fourth week of an indefinite lockdown, container shipping lines are skipping calls at main Shanghai terminals, with more blank sailings anticipated as vessels waiting at Chinese ports double.

Until the lockdown situation is resolved, which appears challenging when putting the Omicron variant against zero-tolerance, we expect drops in export demand, port omissions and more blank sailings, as well as Shanghai-bound cargo increasingly being discharged elsewhere, while trade press reports that the number of container vessels waiting outside Chinese ports has grown by 195% since February to over 500 vessels in April.

Some carriers, including Maersk, have already stopped accepting reefer and dangerous goods cargoes into Shanghai and while the port remains operational, the severe shortage of trucking capacity means the port is slowly being filled with import cargo that cannot be collected, while widespread factory closures are likely to hit export volumes.

Ocean Network Express (ONE) confirmed that trucking remains limited, with terminals congested and while reefer yard plug capacity remains stressed, there is a possibility that reefer containers may not be discharged in Shanghai until the situation eases.

In Hong Kong the number of new COVID-19 cases dropped below 1,000 on Friday for the first time in more than two months, but Shanghai could be facing a protracted lockdown, as more new cases continue to be reported.

China has been keeping ports operational during lockdowns using a closed loop system where the workers live on site, but container yards have grown congested as trucking capacity has dropped.

Compared with the shutdown at Shenzhen’s Yantian port last July, the Shanghai lockdowns have not yet resulted in widespread blank sailings on Asia-Europe, trans-Pacific or Mediterranean services.

In Shanghai in 2022 there was a small initial blanking spike, which was entirely driven by demand to America’s East Coast, prior to the lockdown, as a result of general market turmoil and the level of blank sailings has since dropped below the 2021 level.

According to current carrier schedules there is a slight reduction in the number of blank sailings, though this is likely to reflect the carriers not yet knowing, or at least not publishing the updated schedules of the sailings they will have to blank.

The shipping lines have been cautious in blanking sailings following lockdowns, but not loading as much cargo as planned in Shanghai and not blanking any capacity could erode export freight rates, so shippers should anticipate an increase in blank sailings in the coming weeks, should the Shanghai lockdowns continue.

Lockdowns are limiting available labour for factories and supply chain infrastructure, with reports of empty-container depots being shut, and even where they are open, there is a lack of available equipment. Particularly in the north, affecting the ports of Ningbo, Qingdao, Shanghai and Tianjin.

With bookings from China significantly reduced for the coming weeks, there are bound to be more blank sailings and not just for the lack of exports, but also the operational headaches with not being able to discharge import reefer and dangerous goods containers at some terminals.

Despite talk of a “slight easing” of restrictions in Shanghai, the number of new cases of omicron continue to rise, which means the government’s strict general lockdown measures are likely to continue.

Regardless of the challenging situation in Shanghai, we are working closely with our network partners, carriers and own offices across China, to monitor the local and regional situation and find solutions for our customers, including time-sensitive shipments.

The situation develops continuously and we will keep you updated as new intelligence and insights are received from our colleagues in China. 

We maintain long-term contracts with airlines, carriers and shipping lines that secure space and rates, to provide the best alternatives and options, whatever the situation.

Category: Supply Chain

China | Sea/Air | Supply Chain

Latest News in this category