The Chinese New Year holiday, which lasted nearly one week, along with the Beijing Winter Olympics and the Communist ruling regime’s “zero tolerance” epidemic policy might exacerbate the global supply chain crisis amidst severe disruptions in global shipping, experts said.
Container tracking platform Container xChange said in a late January survey that 66 percent of 500 polled freight industry respondents hold the view that the Chinese New Year holiday from Jan. 31 to Feb. 6 would impose more pressure on the shipping supply chain, with Chinese factory and port shut down further lengthening transit times and tightening available containers.
“Predicting the impact of the Chinese New Year holidays in 2022 is rather more difficult than in previous years because China’s policies on internal travel are rather opaque,” said Johannes Schlingmeier, co-founder and CEO of Container xChange.
China’s Zero anti-COVID policy was imposed on Xi’an of Shaanxi Province, followed by another dozen provinces or cities such as Henan, Guangdong, Guangxi, Shanghai, and Beijing. Each fell victim to the more severe outbreak of the epidemic since last December, with local authorities urgently taking stringent measures including nucleic acid testing, isolation, and lockdown.
The policy forced the closure of factories in the affected areas including Canon, Toyota, Volkswagen, and Foxconn with no specified date to resume work.
Ambrose Conroy, CEO of Seraph, a U.S. supply chain consulting firm, told VOA on Jan. 19 that the supply chain crisis is probably manageable if only factories are temporarily closed, but port closures is a more critical issue: It is fairly difficult to ship goods out of China due to China’s port restrictions and blockades.
The Epoch Times found all ports in Shandong Province have been out of service since last mid-December, including Qingdao Customs, for a period of 2–3 months. Mr. Wang from Weihai City, Shandong Province, told The Epoch Times that on last Dec. 20 when he tried to consign some souvenirs at the city’s customs office for his daughter, who is settled overseas, he was told that all ports in the province had been suspended around the New Year, for unexplained reasons.
Supply Chain Disruptions Cause US Prices to Soar
People shop for groceries at a supermarket in Glendale, Calif., on Jan. 12, 2022. Robyn Beck/AFP via Getty Images
The United States is the world’s largest consumer market, but months of poor logistics result in a severe shortage of goods in large supermarkets and a spike in prices. The Epoch Times found that the price of eggs at Restaurant Depot, a wholesale warehouse, soared from $8 a box (180 eggs) a year ago to $27.39 a box at present, an increase of 242 percent. Other food and daily necessities prices have also generally increased.
According to the latest data released by the U.S. Department of Labor on Feb. 10, the U.S. inflation rate reached 7.5 percent in January, the highest inflation print in 40 years.
With soaring commodity and transportation costs having a huge impact on the global economy and supply chain, the Federal Reserve has invented a new analytical tool—the Global Supply Chain Stress Index (GSCP)—uses nearly 25 years of data and a variety of indicators to map, measure, and manage the adverse impacts on global supply chains and economies.
The study found that the cost of shipping from China to the U.S. West Coast rose by 72 percent from spring 2020 to fall 2021, which indicates that container freight rates have increased by more than 50 percent of the long-term trend forecast. More alarmingly, international freight rates for 40-foot containers rose nearly sevenfold from $1,400 in early 2020 to more than $11,000 last September.
From Feb. 10 to Feb. 17, the World Container Index fell a modest 0.2 percent with the average cost of a 40-foot container at $9,379, up 79 percent from a year ago, the Shanghai–Los Angeles freight rates grew 2 percent reach $10,682 per feu, and Shanghai–New York rates fell 3 percent to $13,061 per feu compared with last 7 days from Feb.3 to Feb.10, respectively, according to shipping consultancy Drewry.
Meanwhile, congestion at U.S. ports has not yet improved. According to Marine Traffic, an online ship tracking website, a total of 201 container ships were waiting in line outside the ports of Los Angeles and Long Beach, the two busiest ports in the U.S., on Feb. 19 local time, and another 152 were about to dock.
Chinese companies in Los Angeles recently saw that their clothing and other goods imported from China, which took only three weeks to arrive before the epidemic, now take an additional six weeks and three days (45 days) according to VOA on Feb. 4.
Dr. Hua Chia-Cheng, Director of Division II of Taiwan Institute of Economic Research, told The Epoch Times in the short term, to contain inflation, the United States will accelerate raising interest rates; in the medium and long term, to avoid over-reliance on Chinese imports, the United States might consider decentralizing the supply chain or at least some essential industrial products for people’s livelihood would be provided domestically, including epidemic prevention supplies.
Winter Olympics ‘Stop Work Order’ Cause a Drop in Bulk Carrier Shipping Cost
Chinese police officers wearing masks stand in front of the Tiananmen Gate in Beijing, China, on Jan. 26, 2020. Betsy Joles/Getty Images
Despite the high container freight rates, Nikkei News reported that large bulk carrier rates fell 90 percent to $5,826 per day from last year’s peak of $80,000 per day, the lowest in nearly 20 months, due to a sharp decline of global demands for iron ore that is exported from China, the world’s largest steel producer.
Huang Jun, chief economist of China Enterprise Capital Union (CECU) said in a previous interview with the Chinese-language edition of The Epoch Times, the recent drop in demands for China-produced steel is due to Beijing’s six-month “environmental protection order” for guaranteeing the Winter Olympics. The official order is called a “stop-work order” in the Chinese industry.
A Sept. 16, 2021 revised program by China’s Ministry of Ecology and Environment directed Beijing and a total of 65 cities in the surrounding seven provinces to meet targets on controlling the average concentration of PM2.5 and the number of severely polluted days from Oct. 1, 2021, to March 31, 2022.
Additionally, China has recently set another 67-day enhanced version of a stop work order for a dozen regions including Tianjin, Hebei, Shandong, Shanxi, and Henan, which brought more than half of China’s provincial and municipal heavy industry enterprises to a halt, according to China Coatings Purchase Net on Nov. 30, 2021.
The official report also emphasized that scattered pandemic outbreaks and subsequent strict lockdown in many parts of China have led to frequent factory shutdowns, employee quarantines, temporary traffic cuts, and highway closures, as well as soaring oil and gas prices due to the energy crisis, resulting in higher logistics costs in China.
Huang Renzhong (a pseudonym), an engineer in eastern China of Ningbo city, Zhejiang Province, told The Epoch Times, many goods cannot be shipped out now and that the Chinese Communist Party (CCP) seems to be using the epidemic as an excuse for deliberate delays. He believes this has to do with the CCP’s institutional and political factors, “The CCP regime seems to be posturing to show the world that it can’t work without me [the CCP],” he said.
Kane Zhang contributes to this article.
Winnie Han reports on China news for The Epoch Times.
