Shippers and forwarders alike in the Asia-US trade lanes have grown concerned about the lack of clarity regarding the reopening of Shanghai and what it will mean for U.S. import volumes once the factories reopen. How the import volumes bounce back will determine if freight rates, which have calmed down recently, will see a sharp increase as peak shipping season approaches.
The uncertainties surrounding when Shanghai will lift their Covid-19 lockdowns is making it difficult for shippers to plan their supply chain strategies for the rest of the year. While Shanghai port remains open, the lockdown in the city and the surrounding regions has made it difficult to move freight and has disrupted multiple industry operations for the past two months. Industry experts say that certain commodities have an easier time shipping out of Shanghai than others. For example, manufactures of higher-value products such as electronics are able to ship out of Shanghai normally while products such as furniture have had a much harder time.
Swift or Sluggish Buildup
Due to the irregularities in the market since the Shanghai lockdown started, there are opposing predictions on what will happen to U.S. imports when Shanghai fully reopens. One prediction has factories ramping up steadily while the eastbound trans-pacific trade lanes fall into the seasonal ups and downs it had before COVID. Industry experts siding with this prediction claim that there is still a surplus of inventory that is straining the capacities of warehouses across the US. The other prediction suggests there is a tremendous amount of pent-up demand which will result in a shipping surge like what happened in 2020 and 2021. The prediction envisions rolling waves of import volumes through this year, starting when first Shanghai reopens.
Shanghai’s Effect on Vessel Capacity
The Shanghai lockdowns have also affected vessel capacity, as of today both shippers and NVOs (Non-Vessel Operating Common Carriers) say that capacity isn’t an issue, and they don’t expect it to be an issue at least through June. Some carriers are even approaching customers whose allocations they cut during service contract negotiations and offering them space at current spot rates. Industry experts are saying that carriers are not worried about the softening market and are not likely to reopen contract negotiations. Some carriers are betting that there will be a bump in the spot rate market once the delayed exports in Shanghai port hit the water and others have planned for this by locking up significant volumes in long term contracts. On the operations side, congestion problems and vessel backlogs that have plagued the US West and East coast ports have significantly improved and this is mainly due to blank sailings. Normally canceled sailings are seen as a negative but in this case, blank sailings have given operational staff at the ports time to catch up.
Final Thoughts
As we wait for Shanghai to fully reopen and the effects on the global supply chain that will follow, trust that ClearFreight stands ready to help you manage your business’ supply chain. Our team of experts stand ready to assist you in whatever capacity you might need. Contact us today to hear how our specialized supply chain solutions can help make logistics easier for you.