China’s Manufacturing Sector Fires Back Up: Capacity Tightens and Rates Increase

China’s manufacturing sector fires back up as the country is far along in its recovery from the Coronavirus (COVID-19) outbreak. However, other countries like the US are still combating the virus; the demand of goods does not match the supply, which has led to ports operating at max capacity and increased rates.

According to an article from JOC.com, the demand in major consumer markets has decreased in the US, and there is potential for a major backup of loaded containers throughout the US port system:

The demand is growing as some retailers and manufacturers fail to pick up containers because warehouses are full or closed due to not being deemed essential service providers responding to COVID-19, or because retailers have requested delayed deliveries at distribution centers. Although the situation remains fluid, ports are warning that because all US import gateways may be simultaneously facing the same situation, a bottleneck of national proportions may be beginning to take shape. . . .

US importers this week triggered a wave of canceled, reduced, and postponed ocean shipment bookings for April, forwarders told JOC.com. But with Chinese factory production recovering, ships from China to North America are sailing at full capacity, said Matthew Leech, CEO and managing director of the Americas at DP World.

The article continues to note that ports are looking at all sides of the situation to find the best solution for the lack of space, including possible negotiations with other ports to take on cargo and gauging warehouse capacities around the country.

According to a Freightos weekly update, air freight rates continue to stay high due to the demand for essential goods and the removal of passenger jet cargo capacity. While additional passenger jets are being used as freighters to ease some of the capacity crunch, rates are remaining high.

“China’s limited the already reduced volume of passenger flights entering the country, further increasing prices. Some Freightos.com marketplace forwarders report rate increases of up to 30% out of China in the last two weeks, with a compound weekly growth of 13% over the last six weeks,” the update states.

The US is trying to expedite the supply chain by suspending tariffs on certain critical items, and the Maritime Commission will soon announce its rules for demurrage fees, which are aimed to protect shippers due to projected delays at ports, according to Freightos.

For information specifically regarding airfreight rates, please refer to our article “Aircargo New: Airfreight rates continue to rise as capacity crunch goes global.”