Shutting down of Ningbo-Zhoushan could impose a serious trial on shipping delays and price hikes: Time to pile up on inventory.
After a worker tested positive for COVID-19 on Wednesday, China temporarily halted a critical terminal at its Ningbo-Zhoushan port, the world’s third busiest port. All inbound and outbound services in the port are currently suspended until further notice. This was the country’s second suspension of operations at one of its major ports this year. This stoppage exacerbates the stress that is already upon the supply chain and will add more delays and send commodity prices even higher, just as the global supply chain is beginning to recover.
China has “zero tolerance” policy towards COVID-19 and that could lead to serious ramifications for the global supply chain. Due to the highly contagious characteristics of the Delta version of COVID-19, which threatens to wreck the global economy once more, countries like China have seen a spike in coronavirus cases.
Nick Marro, the lead of global trade at the Economist Intelligence Unit, stated in an emailed content, “China’s ‘zero Covid’ strategy means that officials would prioritize pandemic mitigation over all else.” “As long as authorities retain this ‘zero Covid’ approach, the potential of unexpected disruptions from testing or lockdowns will exist, tying any prospects of normalcy to issues like national immunization deadlines.”
While all other terminals are running normally, according to a representative for the Ningbo-Zhoushan Port, the partial shutdown occurs at a time when shipping rates are already high, placing pressure on businesses that rely on imported goods and driving up prices for essential items like as electronics, food, and furniture.
According to the Freightos Baltic global container freight index, shipping container rates from China and East Asia to the West and East coasts of the United States have increased by nearly 270% to over $15,800 per TEU and 220% to hit over $17,500 per TEU, respectively, this year.
demand, several significant US ports in Southern California are experiencing unprecedented levels of congestion. According to data from the Marine Exchange of Southern California, 38 container ships were anchored off the coast on Wednesday, waiting for a location to open up to unload at the Los Angeles and Long Beach ports. When the Chinese ports reopen, the lower import levels will not only add to further delays, but will also contribute to greater port congestion.
For months, customers have been feeling the effects of port delays. Due to transportation bottlenecks, commodities are becoming increasingly difficult to procure and produce, resulting in higher prices to compensate for increasing shipping expenses and fewer options. “From the retailer aspect, the key issue will be inventory levels, as they must choose between having limited or no stock of specific things or managing greater expenses associated with air transporting goods instead,” Mario Ciabarra, CEO of digital analytics firm Quantum Metric, told CNBC.
With the increase in the spreading of coronavirus, there will be an increasing demand for PPE products in the coming days. The shutting down of a major port in China will definitely affect the availability of PPE when it is much needed. Hence, the smartest move here is to start piling up on PPE inventory and to look into on-the-ground PPE stock in various locations across North America. As the shipping delays and price hikes continue to increase, the demand for PPE will skyrocket with the 4th wave of COVID-19.