Long-term impact of China Delta outbreak could be ‘detrimental’ to container supply and demand
Fears are growing about the impact of the new Covid-19 Delta variant sweeping through China on international supply chains.
“The container sector is likely most vulnerable if we see renewed lockdowns in China resulting in disruptions to production and to supply chains. Starting from a position of exceptionally tight markets, even small reductions in demand for cargo carrying capacity could have significant effects on container freight rates,” VesselsValue senior trade expert Plamen Natzkoff told CST.
While xChange co-founder and CEO Dr Johannes Schlingmeier told CST: “As the Delta variant has broken through China’s virus defences, the implication for the shipping container industry would be delayed or halted delivery schedules depending on how severe the circumstances are going to turn out in the coming weeks and months. If the outbreak persists for a longer time, the supply of containers could potentially get disrupted which could further higher the container prices.”
While the impact could be “muted in the short to mid-term”, he warned that the long-term impact could be “detrimental” to the overall demand and supply of containers for the global trade.
This warning comes on the back of a surge in prices for used containers in China as well as a shortage in supply of boxes. Container xChange’s data shows that in China, average prices for used 20-foot containers increased 94% between November 2020 and March 2021.
Dr Schlingmeier warns “The surge from an average price of US$1,299 per box in November last year to $2,521 in March indicates that container scarcity is continuing to worsen.”
Dr Schlingmeier says that in the current market, used containers are selling at US$2,300-US$2,600 across China, while prices for brand-new containers at Shanghai, for example, have skyrocketed by 64% in 2021 to an average of US$3,390.
An earlier Covid outbreak that saw severe congestion in Shenzhen’s Yantian port has also hiked container prices up. Dr Schlingmeier says “The average of container price at the Yantian port particularly has increased close to four times since the beginning of May 2021 – a stark increase as compared to Shanghai and Qingdao.”
He sums up “The relentless pace of container shipping trade since the summer of 2020 is not easing and this is reflected in equipment shortages in Asia, and elsewhere.”
Looking ahead, Container xChange expects markets will tighten even further in the coming weeks as the “ripple effect of the Suez Canal closure at the end of March further disrupts container shipping services and equipment availability”.
© 2023 Riviera Maritime Media Ltd.