Image reveals why shipping chaos won’t end

Image reveals why shipping chaos won’t end
Frank Chung May 10, 2022 - https://www.news.com.au/finance/business/other-industries/image-reveals-...

Incredible images show the scale of the shipping crisis that’s causing long delays and rising prices for Australians, with no end in sight.

Shanghai, the world’s busiest port, has been under increasingly brutal lockdown for the past two months as China pursues a zero-Covid strategy, throwing already strained global supply chains back into chaos.

Beijing is now also facing Covid restrictions, sparking fears the end is nowhere in sight.

Australians are being warned to brace for continued delays and price increases on imported goods for the remainder of the year, with an estimated one-fifth of the world’s cargo ships stuck in port.

Vessel tracking images show the scale of the problem, with thousands of ships milling off the coast of China.

More than one-quarter of goods imported into Australia come from China, including $15 billion worth of electronics, $14 billion worth of machinery and $5 billion worth of clothing.

Speaking to 3AW on Tuesday, ANU supply chain management expert David Leaney said the delays and price increases were being seen “across everything from light machinery to clothing and whitegoods”.

“Construction has certainly got some of the biggest delays,” he said. “The lead time to get timber frames if you’re building a house is 46 weeks. Light machinery, outboard motors. In the motor vehicle industry, buying a new car we’re talking 12 to 18 months worth of delay.”

Mr Leaney said generally the disruptions at the moment were in terms of weeks or a few months, but “those disruptions are going to continue unfortunately for quite a long time”.

“The heart of the issue is the unevenness of the current global world supply chain,” he said.

“The issue is around dock workers and crane operators and truck drivers in the ports of China – Shanghai is the world’s number one, Shenzhen, Ningbo, other ports around China, they’re the main cause behind this.

“That’s causing a disruption to the whole system which is all interconnected. So even if they were to solve their zero-Covid issues tomorrow, to get that system back up and running takes ages.”

He likened it to a traffic jam after an accident.

“You clear the accident but then the traffic jam is still there while traffic needs to get flowing smoothly again,” he said.

“We are months away from the traffic flowing smoothly again, and we are months away from actually solving the problem that’s causing the traffic jam. So I’d say we’ve got the rest of this year with delays and increased costs.”

The price of a shipping container has increased by anywhere from three to five times.

While not a huge part of the final cost of an item for the consumer, Mr Leaney said it all added up and was contributing to inflation, which in turn would spur the Reserve Bank to continue to raise interest rates.

“There’s enough shipping containers to circle the equator four times, but at the moment instead of being smoothly spread out around the world, they’re logjammed in these traffic jams in Shanghai and other places,” he said.

“To physically move that many shipping containers and get them flowing smoothly again is a real challenge. It’s a bit like a game of musical chairs – as long as the music’s playing and everyone’s still moving, you don’t realise you’re missing a chair.”

Restrictions hit Beijing amid virus outbreak

It comes as millions of people in Beijing stayed home on Monday while China’s capital tries to fend off a Covid outbreak with creeping restrictions on movement.

Beijing residents fear they may soon find themselves in the grip of the same draconian measures that have trapped most of Shanghai’s 25 million people at home for weeks.

Yet the Shanghai lockdown has intensified, causing outrage and rare protests in the last major economy still glued to a zero-Covid policy.

Customs data released on Monday said exports in April slumped to their lowest monthly rate since June 2020, as key supply chains became knotted by restrictions.

Chinese President Xi Jinping, expected to secure another five-year term later this year, has doubled down on the zero-Covid approach, despite mounting public frustration.

Given the “severe and complicated” situation in the capital, official Xu Hejian told reporters that residents should not leave the city while recent negative Covid tests will be needed to enter public places including offices and supermarkets.

Anger has seethed at the perceived bungling of virus controls, mixed messaging and heavy-handedness of Shanghai officials, including sweeping people with negative Covid tests into state quarantine and leaving entire neighbourhoods short of food.

“Police took action as soon as possible to persuade onlookers to disperse and calm the situation down,” a statement by the Zhuanqiao Covid response team said on Sunday.

– with AFP