Many domestic ports are congested, and sellers may face warehouse explosions and shortages

Many domestic ports are congested, and sellers may face warehouse explosions and shortages

During the epidemic, the entire Shenzhen urgently pressed the pause button, with traffic control, closed management ... which triggered a series of changes.

Recently, some industry insiders pointed out that due to the outbreak of the epidemic in many places in China and the implementation of control measures and blockade restrictions, production in many domestic factories has stagnated and container ships in some major ports have been severely congested. A series of chain reactions caused by this round of epidemic on cross-border industries are emerging.

Qingdao, Shanghai and other ports are congested, and shipping costs may rise again

Some analysts said that the outbreak of this round of epidemic in China is expected to drive up global shipping charter fees and extend the transportation time of goods. In addition, affected by the supply chain crisis and rising transportation costs, commodity prices are likely to rise further and inflation will intensify.

It is understood that this week, queues appeared at many major ports in the country, including Qingdao and Shanghai, which was caused by the shortage of labor and trucks after the outbreak of the epidemic.

Among them, Shanghai area including Shengdong, Guandong and Shangdong terminals in Yangshan Port Area have planned to suspend empty container loading and unloading operations at 14:00 on March 17, 2022, and the resumption time will be notified separately.

Salmon Aidan Lee, head of the relevant department of energy consulting firm Wood Mackenzie , pointed out that in the past few days, the situation at Qingdao Port has deteriorated, time delays have occurred, and freight rates are expected to increase.

On the other hand, the situation at Shenzhen Yantian Port , known as the "world's fourth largest container port," is not optimistic. Jasmine Wall, Asia Pacific manager of SEKO Logistics , said that the loading volume of containers at Shenzhen Yantian Port has dropped a lot compared to before the epidemic, and port workers, truck drivers and factory workers have stopped working, making it difficult for goods to enter and exit the port.

Yantian International issued an announcement on March 14, stating that production operations were stable and orderly, and all operations and trailer businesses around Yantian Port were operating normally.

According to the freight forwarder, Yantian and Shekou are under strict control and have high uncertainty . Since the strengthening of epidemic prevention policies, all trailer businesses in Yantian and surrounding areas are indeed operating normally, and the five districts of Shenzhen and Shantou will resume operations from the 18th, which may alleviate the problem of cargo transportation to a great extent.

But as of now, the work-from-home policy in Shenzhen this week has indeed affected some cross-border sellers. Goods cannot be shipped normally, and they have to wait until next week to load containers for shipment. Some sellers said that Shenzhen and Dongguan did not accept the goods in the past few days, and the freight forwarder replied that they could not guarantee whether the goods could be shipped after receipt, and they did not know how to arrange it.

In this case, some freight forwarders use temporary warehouses to receive goods. Some sellers believe that this method carries a high risk of losing goods, and many shipping schedules are also inevitably delayed.

Shipping risks, high prices, time delays ... After comprehensive consideration, many sellers choose not to ship for the time being and wait until the epidemic is over before making plans. Based on this phenomenon, some practitioners predict that after the epidemic is over, there will likely be a peak in shipments, prices may rise, and warehouses may explode.

On the other hand, the continued epidemic in Shenzhen has also affected the normal production of factories across Guangdong, and the supply chain of cross-border sellers has been affected, and there is a possibility of out-of-stock.

At present, electronic products, home textiles and clothing products have been affected by the supply chain during the epidemic . A seller said, "Before the epidemic, the supplier said there was no stock. After the epidemic prevention and control was upgraded, the supplier said that the factory had stopped working, and the goods were even more scarce. Even if there were goods, they could not be shipped. I waited week after week, and it was even more distant to see the goods..."

Net profit soared nearly 9 times, and the shipping company spent 10 months of annual bonus!

The untimely cold snap caused by the epidemic has pushed many sellers back into the cold winter again. The implementation of lockdown measures in many places has led to obstacles in sellers' shipments and even out of stock, supply chain disruptions, "spring hibernation" of orders , and rising shipping costs. As sellers' costs have been raised, their profits have also been affected.

In sharp contrast to the sellers who are deeply affected by logistics and their profits, the booming shipping business has enabled many shipping companies to achieve explosive growth in their performance. It is no exaggeration to say that they are making huge profits.

Following the 40-month year-end bonus in 2021, Evergreen Marine will issue NT$1.303 billion (about RMB 290 million) in employee compensation for the first time in 2022 to implement an employee compensation incentive policy. Industry insiders calculated based on Evergreen 's number of employees in 2020 that on average each employee can get another 10 months of mid-year bonus , which many industry insiders envy.

Of course, Evergreen’s confidence is inseparable from its unstoppable revenue growth and high profits.

According to the latest performance forecast released by Evergreen, its consolidated revenue in January 2022 reached NT$56.841 billion (approximately RMB 13 billion), once again breaking Evergreen's highest monthly revenue record.

Looking back at 2021, Evergreen's revenue and profits were both record highs. Its revenue reached NT$489.407 billion (approximately US$17.112 billion), an increase of 136.34% compared with its revenue in 2020; its net profit reached NT$239.015 billion (approximately US$8.36 billion), equivalent to a nearly 9-fold surge in net profit.

The main revenue of Evergreen undoubtedly comes from mainland China, and cross-border sellers are the biggest contributors to its impressive performance. In terms of routes, the largest revenue contributor for Evergreen is the US cargo volume, which accounts for nearly 70%, followed by the European cargo volume, which accounts for 30%.

In addition to Evergreen, the chairman of Wan Hai Lines also said that as long as the company makes a profit, it will pay dividends to employees, and on the 15th, it was decided to pay NT$778 million (about RMB 173 million) in salary to employees. Based on the number of Wan Hai employees in 2020, this is equivalent to 15 months of monthly salary for each employee .

Affected by the epidemic, port congestion and the situation between Russia and Ukraine, the shipping market has limited capacity. Many customers have proactively expressed their willingness to use higher prices to lock in available space. Coupled with the still hot shipping market this year, industry insiders predict that freight rates will continue to remain high.

The general manager of Evergreen also commented on the current shipping market with 14 words: "The epidemic continues to cause port congestion, and it is not easy to reduce freight rates."

As for the reasons why shipping costs remain high, Evergreen's general manager said that the demand in the shipping market is greater than the supply, and it is not easy for freight rates to fall, which means that freight rates will continue to remain high. The doubling of long-term shipping contracts in Europe and the United States, continued port congestion, and the June contract negotiations of the US West Coast Dockers Union are not expected to proceed smoothly, which are all important reasons for the high shipping costs.

In addition, due to the Russia-Ukraine conflict, 1.5 million containers transported by rail between Asia and Europe have been diverted to sea transportation, and Russian airspace has been closed to 36 countries. Given the multiple pressures and limited shipping capacity, shipping costs between Asia and Europe will be further pushed up.

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