Logistics and transport: market trends in China's major foreign trade routes to 2022

The year 2021 has just passed, for most foreign trade enterprises, busy and difficult.

Economic repair after the impact of the epidemic, as well as the damage to the local supply chain in some countries, there is a "global trade resonance"; overseas manufacturing replenishment of inventory to further bring the volume and price contribution to rise, of which the first half of the biased volume, the second half of the biased price, both phase there is a positive drive; due to port shipping and other constraints, the demand side is not fully expressed, there A part will be passively delayed, the supply side there is a slow release and "shock pad effect".

However, Chinese foreign trade enterprises, which are on a "high slope", are also facing unprecedented pressure.

A particular challenge in 2021 will be the rise in shipping costs. Over the past year, the maritime market has experienced crises such as the shortage of empty containers, congestion in Los Angeles ports, ship blockages in the Suez Canal, the epidemic in Yantian port in Shenzhen and the epidemic in Zhoushan port in Ningbo.

In 2021, there are also "three shortages" and "four rises" in the foreign trade sector: "three shortages" refers to the lack of cores, containers and workers, and "four rises The "three shortages" refer to the lack of cores, containers and workers, while the "four rises" refer to the rise in freight costs, raw material costs, energy and resource prices, and the RMB exchange rate.

A number of experts predict that in 2022, China's foreign trade development will face an increase in uncertainty, instability and unbalanced factors. Risks such as recurring global epidemics, divergent economic recovery, rising commodity prices, energy scarcity and shipping tensions are intertwined. Domestic economic development is also facing triple pressure from contracting demand, supply shocks and weakening expectations. Combined with the high base of foreign trade in 2021, the foreign trade operation in 2022 is facing a "hurdle".

However, with the resumption of work and production in Southeast Asia, if the RMB continues to appreciate after the Fed's interest rate hike in 2022 and the prices of international commodities continue to rise, how long can this competitive model of simply competing for costs last? Some foreign trade sources said that Chinese enterprises have reached a critical point, gritting their teeth to hold on. Under the mediation of the market economy, many enterprises that cannot support themselves may die, while new ones may rise.

Where is the market heading?

In its latest Asia Pacific Logistics Supply Chain January Market Update, Maersk noted that despite the recurring global outbreak of NSC and concerns over the highly transmissible mutant strain of Omicron, global container freight volumes are expected to continue to grow in 2022 in an environment of continued global economic expansion.

New trends

According to specialist analysts, container freight volumes are expected to climb in 2022, despite global trade being affected by risk factors such as geopolitical tensions. Maersk estimates that global container volume growth will reach 7.8% in 2021.

The global manufacturing sector performed exceptionally strongly in December. the global composite purchasing managers' index (PMI) data released in January showed a very positive fourth quarter for the manufacturing sector, despite many challenges such as delivery delays and the new crown epidemic. in December, the PMI for China's manufacturing sector increased, having exceeded 50.3 for the second consecutive month, which shows that With the Chinese Lunar New Year holiday approaching in February, the Chinese economy is still showing an expansionary pattern.

However, challenges remain - Deutsche Bank's Cargo Congestion Index indicates that the broader supply chain sector continues to face significant pressures and supply chain disruptions, with port congestion and inland transport delays being the most significant issues, while freight rates are expected to continue to rise.

New developments

Container and space pressures remain: Cargo space is expected to be very tight during the Chinese New Year, but this situation is expected to ease in the 5th, 6th and 7th weeks. Maersk will use the holiday period to re-align its services and resume its sailing schedule on-time, with no significant window of vacancy expected. Container availability will be tight in some areas and carriers are advised to consider using 20ft containers and cold generation dry containers (NOR) in place of 40ft containers.

Market trends on key routes:

Asia to North America: Capacity is expected to continue to decline due to congestion at ports. To mitigate the impact of the reduction in sailings, Maersk called in five extra vessels in January to meet customer demand for sea freight ahead of the Chinese Lunar New Year. The situation in North American ports is likely to improve shortly and customers are advised to extend the delivery lead time between estimated arrival and actual departure times.

Asia to Northern Europe: Slots have been quite tight due to high demand in the run up to the Chinese Lunar New Year, but demand levels are expected to return to normal soon. Maersk will assist customers in deploying extra vessels as required. If low vessel utilisation is observed, the ship's schedule spot rate will be restored as soon as possible. A substantial vessel reset (CA online) programme has also been initiated, so that commitment weeks and sailing weeks will be aligned across the board from week 7 onwards.

Asia to Mediterranean: To mitigate the capacity gap caused by the suspensions and delays, Maersk has deployed three extra vessels and will continue to use internal transshipment or call extra vessels to achieve earlier deliveries. The AE12 and AE15 routes are also being restructured and some port calls have been suspended to limit the impact of berth delays.

Consolidation of supply channels after the Chinese Lunar New Year has also been initiated and plans are in place to schedule fewer calls during the slow Chinese Lunar New Year cargo season to facilitate a gradual return to normal schedules.

Key port developments:

Asia: Terminal operations are busy and are currently operating at high density, but delays are currently low. Trucking services operations in the Jinan area of Tianjin have been suspended due to the epidemic blockade measures. Given the potential for delays at the Port of Tianjin, customers are advised to consult our Customer Experience team first to confirm if a change of port for cargo handling is possible.

Europe:Congestion is widespread and yard densities are at critical levels in several ports. The Port of Felixstowe is the most congested, with waiting times of 7-10 days. Most other ports have waiting times of 2-4 days. Israeli ports in the Mediterranean region have been closed due to operational constraints. Meanwhile, the Coppell, Rijeka and Trieste regions are also experiencing transport restrictions due to supply chain disruptions.