China Supply Chain Disruption Unfolding: China Freight Crisis 2022
The global shipping crisis that started to unfold right after the worldwide pandemic of COVID-19 has been unstoppable. Different factors played a part in articulating the shipping crisis of 2021 that has continued in 2022.
Being the largest exporter globally, China was the most affected economy in terms of shipping delays, costs, and containers. The crisis that started with the shortage of shipping containers, shipping delays, and increasing freight is becoming a China supply chain disruption.
In this article, we will explain the China Freight Crisis or Supply chain crisis unfolding in 2022, disrupting the global and Chinese supply chains. Among different factors, the spike in COVID cases in China also contributes to the shipping congestion forcing the world into a freight crisis and supply chain disruptions. Other factors to study in disrupted global supply chains are the chip crisis and the war in Ukraine.
What Is China Freight Crisis?
In 2021, the increase in the shipping costs in China was due to the lockdown and closure of the three most important and busiest ports of South China: Yantian, Nansha, and Shekou. New covid variants, changing market dynamics, shipping delays, shortage of containers, etc., were some of the factors contributing to the crisis.
You can read more about the origin of China’s Shipping Crisis and Shipping Delays here:
Most of the global supply chain experts were optimistic that the shipping delays, shortage of containers, and ten folds surge in freight cost would move toward betterment in 2022. However, as we are advancing to 2022, the mere freight crisis is leading us to China’s supply chain disruption that will be translated into the global supply chains.
How Is China Freight Crisis Leading to China Supply Chain Disruption?
The global supply chain crisis the world is in currently started from a shipping delay and freight crisis back in 2020. However, the current surge in the COVID-19 cases and imposed restrictions in Chinese trade hubs are taking the supply chains back to square one.
As reported by Bloomberg, the adversities of virus outbreaks in China will disrupt the global supply chains handling international trade of $22 trillion. And this effect can be expected to be rippled in months to come.
Here is what to expect from the global and china supply chain disruption as it will unfold in the coming months of 2022 as well:
Shanghai is the trade hub of China for consumer goods, electronics, and similar products. However, the lockdowns in China after the resurge of COVID-19 cases have and will impact the flow of consumer goods in the international markets. i.e., North America, South East Asia, and Europe.
The closure of trade ports is restricted to China, but the US and South Korea also contributed to the logistics disruption due to ports closure. The impact of the supply chain crisis has forced the industry leaders and economies to build resilient strategies for coping with the inventory shortages of consumer goods and build alternative supply chains to pull the world out of the crisis.
Production and Shipping Delays
Production and shipping delays started in 2021, and they can be expected to continue in 2022. Labor market shortages and delays in shipping were translated into the production delays leading the market leaders to evaluate the supply chains.
The shipping delays from China to the USA were due to the shortage of containers. Every container that would travel empty to China for reuse is now half empty or full before being shipped back to China. This global practice was to control the shipping costs.
Besides, the reports of Windward have confirmed that around 20% of the world’s 9000 active container ships are in a state of traffic jam outside the congested ports. The previously 14.8% global container backlog at China’s ports has bulked up to one-third now.
Global inflation is increasing due to increased freight rates, low production levels, and the Ukrainian war in Europe. Despite the inflationary pressure and hostile trade environment, the global supply chain experts suggest that the supply chains are evolving to create durable logistics independent of inflationary pressures.
Most of the importers in the USA rely on third parties in China to improve the trade to increase the agility and resilience of the supply chains. The third-party service providers can work as the major trading partner to analyze and ground the risks of the supply chain. The global supply chain experts also emphasize that the importers improve business agility and resilience by having diversified supply chains that can only be achieved with the help of third-party service providers.
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Question It Has Put Forward For Global Supply Chains
The whole situation has asked several questions for the global supply chains and the markets. Let’s try to answer these questions briefly.
Why is Freight From China Increasing?
The freight increase from China is due to global inflation and fuel inflation.
Why Is There a Shortage of Shipping Containers in China?
The shortage of shipping containers in China didn’t exist pre-pandemic. With the pandemic and global lockdowns, the port congestion, traffic jams, and labor shortage, the containers had to wait longer for unloading, resulting in a lack of shipping containers.
Is Shipping Still Delayed 2022?
Shipping is still delayed in 2022. We hope the situation improves with the China supply chain disruption resulting in resilient logistics. The fuel inflation has resulted in 5-8% of trade delays between Europe and China. Another reason for the delays is the container backlog in China.