World's Third-Busiest Port Remains Partially Shut In China, Stoking Fresh Supply-Chain Fears

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by Tyler Durden
Tuesday, Aug 17, 2021 - 05:00 AM

Last week we reported that with container shipping rates already blowing out to never before seen levels amid continued chaos in Transpacific shipping as a result of massive port backlogs and production delays in China due to the relentless onslaught of the now-endemic covid, a new and even greater price surge was on deck - an outcome which could nuke hopes for renormalization in soaring inflation - as a result of the partial (for now) shutdown of China's busiest port by volume (and third-largest container port in the world after Shanghai and Singapore) when operations at the Ningbo Meishan Container Terminal, also referred to as the Meishan Terminal, were immediately suspended following positive Covid test results.

Well, it didn't take too long for Bloomberg to report that the spread of the delta variant could "lead to a repeat of last year’s shipping nightmares", and for confirmation look no further than the Port of Los Angeles, the nation's busiest post, which in June saw its volumes dip because of a Covid outbreak at the Yantian port in China, and which was bracing for another potential decline because of the latest shutdown at the Ningbo-Zhoushan port in China, a spokesman said.

Anton Posner, chief executive officer of supply-chain management company Mercury Resources, said that many companies chartering ships are already adding Covid contract clauses as insurance so they won’t have to pay for stranded ships.

The port of Ningbo, the busiest port in the world.

And here is the core problem with all those endorsing a "transitory" inflation spike captured in a perfect soundbite: just when it seemed as if things were just starting to calm down, “and we’re now into delta delays,” said Emmanouil Xidias, partner at Ifchor North America LLC. "You’re going to have a secondary hit."

There was more: we also noted that the shutdown at Ningbo-Zhoushan had raised fears that ports around the world will soon face the same kind of outbreaks and Covid restrictions that slowed the flows of everything from perishable food to electronics last year as the pandemic took hold. Infections are threatening to spread at docks just as the world’s shipping system is already struggling to handle unprecedented demand with economies reopening and manufacturing picking up.

The silver lining is there was some hope the partial closure would end in a the next few days. However, as of Monday morning, the Ningbo-Zhoushan container port remained partially closed for a sixth day Monday, amid ongoing concern over whether the shutdown will disrupt trade from the region longer term.

Amid fading hopes of a quick reopening, Bloomberg reports that the port hasn’t published any updates on its operations since Wednesday, when it halted all inbound and outbound container services at its Meishan terminal after one employee tested positive for Covid-19. Consultant GardaWorld estimated the terminal accounted for about 25% of container cargo through the port, though Ningbo-Zhoushan had said it would redirect ships to other terminals and adjust operating hours at other docks.

An employee at the port’s media center said they had no new information to share when contacted by Bloomberg News on Monday, adding that no new infections have been reported at the port since the initial case although considering that China is the source.

Meanwhile, shippers are bracing for further complications: according to Bloomberg, shipping firm Yang Ming Marine Transport warned clients of potential “port congestion” due to the partial closure in an advisory on Monday, while Orient Overseas Container Line reminded customers to check terminals before arranging for their containers to be sent to Ningbo in a Saturday notice. Others are taking more more drastic steps: Maersk said Friday it is having vessels on services between Asia and South America call at the Meishan terminal, and that all will omit Ningbo this month.

Yards at Beilun and Yongzhou terminals are up to 79% full with laden containers and as much as 85% for empty boxes, Maersk said Monday. Other terminals at the port are operating normally.

The latest port disruption followed the closure for about a month of Shenzhen’s Yantian port in late May after an outbreak among port staff, which was among the catalysts sparking the avalanche of downstream congestion that has led to record prices. It’s also stoking fears that ports around the world could face similar outbreaks soon given the spread of the highly-infectious delta variant, potentially triggering the sorts of curbs and disruptions that impacted global shipping last year.

Meanwhile, relief from skyhigh shipping prices which impact intermediate goods costs which have exploded to levels not seen since 1973...

... is nowhere to be seen.