Seems like China is in dire straits. Hit by the resurgence of Covid-19, the country is facing violent protests and has sent US logistics managers in a tizzy as they prepare for delays in the delivery of goods from China in early January. The delays will be caused by canceled sailings of container ships coupled with rollovers of exports by ocean carriers.
The decline in demand has led to an unrelenting reduction in container freight rates from Asia, in turn, forcing ocean carriers to blank more sailings than ever before as vessel utilization hits new lows, according to Joe Monaghan, CEO of Worldwide Logistics Group.
As the country continues to deal with Covid-19 lockdowns, US demand in China’s manufacturing industry has reportedly dropped sharply with some of the companies even looking to move away from China. In the recent times, US manufacturing orders in China are down 40 per cent, according to CNBC Supply Chain Heat Map data.
It must be mentioned here that China’s, considered a major manufacturing hub, manufacturing purchasing managers’ index came in at 48 in November, the lowest reading in seven months. The data measures the performance of the country’s manufacturing industry.
Now, as China fights its own battles – Covid and angry protests – it is expected that factories in the country will close two weeks earlier than usual for the Chinese Lunar New Year, according to Worldwide Logistics. “Many of the manufacturers will be closed in early January for the holiday, which is much earlier than last year,” Monaghan said.
China had touched record-breaking levels of trade during the pandemic lockdowns, however, vessel TEU (twenty-foot equivalent unit) volume from the Asian country to America has dropped notable since the end of summer 2022. This decline includes a 21 per cent dip in total vessel container volume between August and November.
Further, HLS, an Asia-based global shipping firm, has raised concerns about the ocean transport business climate saying, “we have the combination of declining demands and overcapacity as new tonnage enters the market.”
Another 2.5 per cent decline in container volumes is forecasted by HLS analysts and a nearly 5-6 per cent increase in capacity in 2023, which will continue to negatively impact freight rates in 2023. The container shipping market will be further complicated by economic uncertainty, geopolitical concerns, and also the increasingly heated market competition, HLS said.
A significant plunge in US imports from Asia was seen in October as they dropped to their lowest level in 20 months.
Apple to leave China?
Rocked by turmoil, China apparently no more appears confident to companies that greatly trusted it earlier, one being iPhone maker Apple. iPhone production at the world’s biggest iPhone factory in Zhengzhou has declined such that wait times for the iPhone 14 Pro averaged 37 days in late November – the longest time since the new model was released, according to Counterpoint Research.
In view of this, Apple has over the past few weeks ramped up its plans to move some of its production outside China, The Wall Street Journal quoted people engaged in discussions as saying. Apple has asked its suppliers to actively look for assembling Apple products elsewhere in Asia, particularly India and Vietnam.
