The ports in the west are bracing themselves for increased congestion as the Chinese government is expected to lift the stringent COVID-19 restrictions in major cities, which could come at the time when importers begin to load up for the back-to-school and holiday shopping seasons.
Los Angeles and Long Beach ports, the import gateways of California which handle more than a third of all containers coming into the U.S., are still inundated with uncollected cargo more than two years into the pandemic.
Once full export shipments resume in ports including Shanghai, which moves more than a quarter of all containers heading to Europe and the U.S., some officials say importers could face more delays in the arrival and handling of their cargoes, as well as higher delivery costs. Recent lockdowns in cities across China have weighed on factory activity, which in April, fell to the lowest level since the early days of the Covid outbreak.
The lockdowns in Shanghai and elsewhere in China are denting sales, disrupting operations, and putting added strain on supply chains that could be felt well into the summer, warns some U.S. companies.
Peak season for liner ships which usually commences in late August and ends in November, this year is expected to start earlier, as several American importers are renting cargo space on ships for deliveries in early June. Importers of furniture, toys, homeware, and electronics like Amazon.com Inc., Walmart Inc., and thousands of others have already moved up shipments to avert delays and secure enough inventory for the back-to-school and year-end holiday buying seasons.
Some shipping executives are skeptical that box ships from China will deluge U.S. and European ports in the months ahead. The Port of Shanghai didn’t close during the pandemic, but export volumes have fallen by as much as 30% since March, according to the Freightos Baltic Index. Inventory levels are already elevated for a range of companies that are trying to avert shortages or delayed deliveries.
While the Shanghai port has not had a big impact yet, the congestion is still a big issue. As per experts, boxes at East Coast ports such as New York, are piling up as cargo owners fear the West Coast will stay congested. Warehouses in Shanghai are operating at 20% to 50% capacity, cargo at European ports is moving slowly and about 10% to 12% of the global container fleet remains stuck at ports.
The fallout from China’s lockdowns has been limited so far. As of late last week, 39 ships were waiting to anchor outside Los Angeles and Long Beach, compared with more than 100 earlier in the year.
However, the two U.S. gateways have limited free space and any sharp increase in incoming cargo could again rattle supply chains with higher costs and long delivery delays. But as the Shanghai port is still open and some cargo moving, some observers are hopeful that the eventual reopening will have less impact in terms of delays, congestion, and increased rates than previous closures.