Business, Freight News, Sea

Zero Covid lockdowns – container prices

[ March 16, 2022   //   ]

After two weeks since Russia’s invasion of Ukraine, there seems to be a negligible impact on the container prices and leasing rates in China. Container availability improved soon after the Chinese New Year across key ports in China – that is until March 11. Now with the announcement of nationwide lockdowns in China on March 14, the supply chain must prepare for another turmoil in the flow of container movement in the coming months as importers worldwide prepare for the coming peak season later this year.
At the port of Ningbo, average prices for a 40 feet high cube container fell by 10% approximately from $5930 on February 14 to $5329 on February 27. As of March 10, these prices stood at $5248. Similarly, average prices fell by 10-15% at the ports of Shanghai, Qingdao and Shenzhen until March 11. Shenzhen witnessed a drop of 8% in the past two weeks.
However, the March 14 lockdowns in Shenzhen, Zhejiang, Shanghai, Jilin, Suzhou, Guangzhou and Beijing (with probably more to come in a few days) will heavily restrict container movement at these ports. This, says Container xChange analysts, will prove to be further damaging for the global supply chain.
Clearly, 2022 has not brought any cheer to the supply chain industry. On top of this, war will just prove to be another disruption amongst the other innumerable factors for China’s supply chain.
“Freight rates and container prices were already at a record high even before the invasion started, and what happened immediately due to the war is that the Russian ports were not being called by the national shipping lines anymore, the Black Sea being somehow closed, and the Asia European railway being quite hit by this,” said Dr Johannes Schlingmeier, co-founder and CEO, Container xChange. “The immediate impact of this on the overall supply chain has not started to show up.”
Although containerized cargo is not that impacted by Russia since that country’s trade is not big enough to disrupt supply chains, container prices are at record highs. Containers are piling up, adding to their massive shortage.
“This is a result of many more other disruptions over the past two years since the pandemic started,” Schlingmeier said. “Lockdowns in China will further reduce capacity and cause a surge in already inflated shipping prices. The shockwaves will be felt across the US and America, and almost everywhere in the world.”
So far the impact of the war on container prices is limited. The average prices of containers have declined by an average of 10-15% since February for 20 feet dry containers. The average prices for 40 feet high cube containers have increased slightly at the port of Shanghai while declining at Ningbo and Qingdao since January up until the second week of March (see charts below).
In the immediate future, the closure of the Asia-European railway (which only accounts for roughly 2.5% of Asia-Europe cargo) will cause the high-value cargo to be pushed to ocean freight, which is already low in capacity. This will put more pressure on the already struggling supply chain. Adding on top of this, China’s lockdowns will be nothing less than a major shockwave to an already crippled supply chain.

If industry reports are to be believed, China could emerge as a buyer for Russian crude which could help alleviate some of the current global supply concerns, and the EU buys more from the Middle East. With the COVID outbreaks and subsequent lockdowns, this expected surge in trade will slow down at least for some weeks/months.
Furthermore, there are midterm and long-term implications that analysts foresee, such as disruption in the trade of goods and increased US efforts to insulate itself from geopolitical shocks to international supply chains fueled by key sectors of the Chinese economy. Currently, China controls most of the global market for the processing and refining of rare earths and critical minerals.
Inbound containers in China rise, expected to further increase due to lockdowns
The CAx (Container availability index) for two of China’s major ports (Shanghai and Ningbo) is expected to increase further at a rather fast pace from around the 0.6 mark in the second week of March, meaning more inbound containers than outbound. It is unusual for this Asian behemoth that normally exports more than it imports – exhibiting the persisting bottlenecks of its trade routes and the bottlenecks that will inevitably emerge from these lockdowns.

Tags: ,