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Viewpoint: China COVID policies to squeeze flow of European exports to North America

An empty-container-supply crisis is expected to fuel the next capacity constriction issue

Containers in Shanghai. (Photo: Shutterstock)

China’s zero-COVID measures are producing another problem in trade. Logistics providers in Europe told American Shipper they are concerned about an impending empty-container-supply crisis. A bitter combination of blank sailings and an increase in delays of Europe-bound shipments from China have created a cocktail of capacity constriction.

“You need imports to have containers for exports,” said Alexander Geisler, managing director, German Shipbrokers’ Association (ZVDS). “The whole system only works when you can put a container six to seven times on a ship in a year. Therefore, you have to reduce the dwell time in the ports and at the inland terminals.”

The drop in twenty-foot equivalent units from Europe to the U.S. East Coast can clearly be tracked.

‘A lack of empties’

As a result of the decrease in TEU capacity from the Far East to Europe, logistics companies have fewer containers for clients to fill their products bound for the East Coast.

“Vessels are slowing Asia and there is a lack of empties,” explained Anne Brouwer, director of operations at TOC Logistics. “We are very concerned about the impact on availability of empty containers for European exports to North America’s East Coast.”

 Project44 details the delays in shipments from China to Europe.

“Although the Port of Shanghai has remained open throughout the lockdown, leading to very little port congestion, the shuttering of China’s manufacturers means that export shipment delays will persist for weeks, if not months, to come,” said Josh Brazil, SVP of supply chain insights for project44.

Alan Baer, president of OL USA, said his Hamburg, Germany, office pinpointed the container shortage leading to canceled bookings out of Europe.

“All the capacity is booked, no matter what the rate is,” Baer said. “I have been told there are approximately 60,000 TEUs waiting on 10 large vessels off of Hamburg. They say you cannot book for June because it is too early. But if you book for the end of May, there is a possibility of being rolled to June. I am told this is the craziest time they have ever seen.”

Waiting for the cork to pop

With testing expanding to the largest district in Beijing and COVID cases increasing there, the immediate future offers few positives. Dozens of buildings are already under lockdown; if more are added to that list, logistical restrictions are likely to follow.

“Until the ‘zero-COVID’ cork is popped, the logistics picture will continue to be cloudy,” said Richard Strong, director of account management at TOC Logistics.

The pressure of that cork inhibiting the free flow of trade in Shanghai is building at other ports, which will further impact the Europe-to-U.S. trade. The flood of canceled sailings to Shanghai and the rerouting of trade to Ningbo are creating delays.

“An increasing number of blank (or canceled) sailings and/or an increase in delays in Chinese ports in particular will undoubtedly result in a reduction in the number of boxes being moved into Europe for discharge, and therefore down the line the European export to NAM (and other areas as well) will have a deficit in available empty containers,” explained Niels Madsen, vice president of product and operations at Sea-Intelligence ApS.

“This may however be both good and bad for North America, since less containers from Europe may assist to ease up the congestion currently experienced in North American East Coast ports, which will assist US importers in receiving congested cargo faster. On the downside, less containers in import from Europe may then have the effect of less empty containers available for North American East Coast exporters. But that is a couple of months down the line.”

This inevitable container restriction will not only hit European exports but fuel the flames of inflation as the price of these coveted boxes will only go up.

Lori Ann LaRocco

Lori Ann LaRocco is senior editor of guests for CNBC business news. She coordinates high profile interviews and special multi-million dollar on-location productions for all shows on the network. Her specialty is in politics, working with titans of industry. LaRocco is the author of: “Trade War: Containers Don’t Lie, Navigating the Bluster” (Marine Money Inc., 2019) “Dynasties of the Sea: The Untold Stories of the Postwar Shipping Pioneers” (Marine Money Inc., 2018), “Opportunity Knocking” (Agate Publishing, 2014), “Dynasties of the Sea: The Ships and Entrepreneurs Who Ushered in the Era of Free Trade” (Marine Money, 2012), and “Thriving in the New Economy: Lessons from Today’s Top Business Minds” (Wiley, 2010).