While the Suez Canal blockage affected a total of about 330,000 twenty-foot equivalent units (TEU) over six days, the clogged Yantian terminal in Shenzhen, China has affected 357,000 TEU over a 14 day period. The impacts are only growing as the backlogs continue to pile up and other Shenzhen terminals feel the effects of the Yantian congestion.
Blockage Causes
In late May 2021, Shenzhen experienced a COVID-19 outbreak, resulting in the shutting down of Yantian’s west terminal and the reduction of the east terminal’s productivity by 70 percent. Infections have been spreading to other Shenzhen terminals as well as the neighboring port of Guangzhou, with quarantine measures further escalating delays across the board. In addition to the outbreak, South China is experiencing delays due to deficiencies in labor, raw materials, equipment, and space, combined with high demand.
The Shenzhen port complex is the third-busiest port globally, causing its delays and those of the neighboring regions to have rippling effects throughout China and the world. Furthermore, previous measures for coping with strong demand and pandemic measures have only depleted the port’s capacity to adapt to the current situation. Dozens of ships are waiting to enter the terminal, as dwell times continue to increase.
Limited Solutions
As lead times grow and prices for land and air cargo skyrocket, logistics companies are exploring the few options available. Many have announced Yantian cuts in their schedules, increased the number of load ports to serve as Yantian alternatives, and are attempting to shift their operations to rail going toward Europe or other ports in China.
While the cuts and alternative ports may help the terminal reduce its backlog, rail options may provide very limited relief as they have not been exempted from the rippling effect from the port. In the meantime, carriers will need to deal with higher prices and alternative adaptive measures.
What Shippers Can Expect
Ports should be able to resume normal operations soon, however shippers should be prepared for further port delays due to resulting surges in cargo. These surges may cause two- to five-week backups in destination ports as they scramble to handle the increased loads. For comparison, impacts from the six-day Suez Canal blockage in late March continued for over two months after the incident.
Europe and the US will continue feeling the effects of the backlog, as Yantian is a crucial link between these regions and their Chinese manufacturing hubs. To make matters worse, demand from the US only continues to grow, with import volumes hitting record levels in May. To cope with the competing demand levels and shipping capacity, shippers might want to consider prioritizing certain goods while delaying others.
Low schedule reliability from Asia to the US West Coast is also a possibility, with carriers prioritizing higher-paying cargo and pricing incentives rather than scheduled port calls. These issues are feeding a push for congressional action to update the Shipping Act of 1984, potentially leading to a tense next few months.
While we cannot be certain of what the future holds, we can safely assume that the chaotic nature of today’s global supply chain will not be going back to “normal” anytime soon. If you are one of the many businesses affected by the sudden and unpredictable shifts in the shipping industry, you might want to consider partnering with a reliable third-party logistics company.
ClearFreight, for example, strives to offer our customers more than just cost effectiveness and supply chain simplicity; we take a personal interest in our customers and do our best to anticipate issues to hopefully help them avoid unnecessary delays. Contact us today for more information about our supply chain solutions and how we can customize them to fit your needs.