Caixin
Aug 14, 2021 08:14 AM
ECONOMY

China Port Shutdown Raises Fears of Closures Worldwide

Containers sit stacked next to gantry cranes as trucks operate at the Port of Ningbo-Zhoushan in Ningbo
Containers sit stacked next to gantry cranes as trucks operate at the Port of Ningbo-Zhoushan in Ningbo

(Bloomberg) — A Covid outbreak that partially shut down one of the world’s busiest container ports is raising concerns that the rapid spread of the delta variant will lead to a repeat of last year’s shipping nightmares.

The Port of Los Angeles, where volumes dipped because of a June Covid outbreak at the Yantian port in China, is bracing for another potential decline because of the shutdown of a terminal at the Ningbo-Zhoushan port in China, a spokesman said. Anton Posner, chief executive officer of supply-chain management company Mercury Resources, said many companies chartering ships are already adding Covid contract clauses so they can avoid paying for stranded ships.

Just as things seemed to start calming down, “we’re now into delta delays,” Emmanouil Xidias, partner at Ifchor North America LLC, said in a phone interview. “You’re going to have a secondary hit.”

The shutdown of the Meishan terminal at Ningbo-Zhoushan is raising fears that ports around the world will soon face the same kind of outbreaks and Covid restrictions that slowed the flows of everything from perishable food to electronics last year as the pandemic took hold. Infections are threatening to spread at docks just as the world’s shipping system is already struggling to handle unprecedented demand with economies reopening and manufacturing picking up.

The Baltic Dry Index, which serves as a global benchmark for bulk shipping prices, is up more than 10% since a month ago as the delta variant spreads rapidly. While there haven’t been significant effects at U.S. ports, the problems in China could hurt companies that rely on container exports.

Container prices also have soared, with the benchmark cost of shipping a container from Shanghai to Los Angeles up more than 220% over the past year to $10,322 this week.

Aside from Meishan, all other Ningbo-Zhoushan terminals have been operating normally, the port said late Thursday in a statement. The port is actively negotiating with shipping companies, directing them to other terminals and is releasing information on a real-time data platform, it said.

To minimize the impact, it’s also adjusting the operating time of other terminals to ensure that clients can clear shipments. A spokesman for the port contacted Friday said there were no further updates.

Company Reactions

Some ships that docked at the Meishan terminal before the closure are suspending cargo operations until it reopens, according to a notice to shippers from shipping line CMA CGM SA.

Other vessels that usually call at the Meishan terminal will stop at the Beilun terminal instead, according to a statement Thursday from A.P. Moller-Maersk A/S. One of the company’s ships will skip Ningbo next week, it said.

“We are working on contingency plans to mitigate the likely impact on our vessel schedules and cargo operations,” Orient Overseas Container Line, a container subsidiary of Orient Overseas International Ltd., said via email.

Ningbo city is still considered a low-risk virus area, according to the city’s health commission, although flights to and from the capital Beijing have been canceled.

A worker at the Zhoushan port tested positive, local authorities said Wednesday. The worker was asymptomatic as of Thursday afternoon. He was infected with the delta strain, genetic sequencing showed, and epidemiological investigation showed the worker came into close contact with sailors of foreign cargo ships.

Contact editor Bob Simison (bobsimison@caixin.com)

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