While much of the focus has been on the challenges shippers
and carriers face getting imports offloaded at their destination ports and
delivered, there are also growing backlogs at Chinese factories and ports. The
problems developing at the front end of the supply chain are now raising
concerns about further challenges contributing to global delays and shortages
likely to drive shipping costs even higher.
The latest analysis of trends across the global supply chain
from project44, an advanced visibility platform for shippers and logistics
service providers, highlights the depth of the challenges developing at the
front end of the supply chain from China. While the record-setting 73 ships
anchored off Los Angeles and Long Beach made headlines last month, project44
believes the problem is becoming equally acute at the source with port
congestion at China’s largest ports underscoring the scale of the situation.
Containerized trade through Chinese ports accounts for 40 percent of global
container trade with the leading trade routes emanating from China’s ports to
the west coast of the United States and Northern Europe.
According to project44 data, as of October 7, there were
approximately 386 ships anchored outside or at the terminals in Shanghai and
Ningbo. Shanghai is the world’s busiest container port while Ningbo is the
third busiest container port in the world. At those two ports alone, project44
determined there 228 were cargo ships and 45 container vessels.
Josh Brazil, project44’s VP of Supply Chain Insights, likens
the current situation to a “global whiplash effect.”
In addition to the disruptions and delays being caused at
the terminus points in the supply chain, there is also a range of issues that
are impacting the ability to move goods out of China. These range from
lingering backlogs as a result of the COVID-19 closure and controls at the
ports, last week’s Golden Week holiday, and the impact of Typhoon Chanthu,
which closed the ports at Shanghai and Ningbo. Moreover, businesses across
China are facing a power-shortage crisis due to coal shortages and the
government’s strict rationing of electricity.
The extent of the growing supply chain problems originating
in China is demonstrated by increasing dwell times at China’s ports, rollover
rates that remain at elevated levels, and longer lead times for products from
the ports to reach their destinations. According to project44, these numbers
spell further product shortages, delays for businesses and consumers, against a
backdrop of holiday sales and a global post-Covid recovery.
“We can expect these growing backlogs across Chinese
manufacturers and ports to exacerbate imbalances at US and European ports,”
says Brazil.
Container rollover rates, defined as the percentage of
containers that miss their scheduled sailings, have stayed high, indicating
that Chinese ports are not making significant headway in dealing with excess
cargo. project44’s data indicates that rollover rates are still rising,
reaching 36 percent in September at Ningbo. For the ports of Hong Kong and
Shanghai, rollover rates although showing a slight reduction remain high at 41
and 37 percent.
“When there are cargo rollovers due to vessel space capacity,
overbooking, blank sailings, etc, additional costs will be incurred by way of
port costs which contributes to increases in freight rates,” says project44.
The delays caused by cargo rollovers also affect production and delivery
patterns at the destination ports as customers who have placed orders for raw
materials for manufacturing or retail goods for consumers cannot get their
goods in time.
project44’s real-time supply chain visibility platform
highlights that the lead times for shipments from China to U.S. West Coast have
drastically increased in 2021 compared to 2020 and 2019. Lead times from
China’s primary ports at Shanghai, Qingdao, and Yantian are each up by more
than a third when compared to 2019.
“As it becomes increasingly hard to get inventory from
factory floors to end-consumers, competition for shipping capacity will heat
up,” predicts Brazil. “At this point, pretty much everybody is feeling the
pain. The challenge is less about achieving full inventory -- that ship has
sailed -- and more about adapting to, and planning for future disruption.”