The Ukraine-Russia war and the outbreak of the Corona virus in China threaten global supply lines

On Thursday, Maersk, the world’s second-largest shipping company, warned of “unforeseen operational impacts” from Russia and Ukraine warWhile in southern China, waiting times for ships trying to dock at the ports of Yantian, Chiwan and Shekou have increased.

The unrest so far is not as severe as it was in the worst months of the pandemic. Chinese authorities in recent days have allowed some manufacturers, including one of Apple’s major suppliers, to reopen their doors under strict restrictions.

But supply chain specialists said they expect conditions to deteriorate, reflecting the recent improvement in the backlog of container ships off the California coast and complicating the Fed’s fight against inflation.

“What people expected to be a year of recovery is going to be another year of crazy hiccups in supply chains,” said Johannes Schlingmeier, CEO of xChange, a shipping container rental company in Hamburg.

Over the past 30 years, supply lines stretching across the oceans have fueled and empowered prosperity International Economy to grow two and a half times larger, according to World Bank data.

Even before the Ukraine-China war Corona virus setbackSupply chain struggles have been the single constant factor in the pandemic-era economy. Last week, in the echo of the Suez accident 2021, a ship of the same shipping line run aground in Chesapeake Bay, Maryland.

“These things happen quite often,” said Ami Daniel, chief executive of Windward, a naval intelligence firm in London. “The world is getting more and more complex to trade in.”

Crises emerged in Russia and China as some of the world’s worst backlog appeared to be undoing. The impasse for ships off the coast of Southern California, which peaked last year above 100, has been halved, according to the Southern California Marine Exchange.

Cargo began shipping more quickly late last year after port officials threatened a fine Terminal operators for containers that remained on the berths. During the first two months of this year, the Port of Los Angeles handled 5.4 percent more containers than the same period in 2021, which was a record.

“The liquidity and speed of our berths continues to improve,” Port of Los Angeles CEO Jane Siroca told reporters this week.

But Lars Jensen, CEO of Copenhagen’s Vespucci Maritime, called the apparent progress a “mirage,” saying ocean tankers are rerouting ships to other US ports, including Charleston, South Carolina, causing smaller bottlenecks there.

Port officials expect imports to continue rising this spring as retailers rebuild their meager inventories. Many companies are preparing for the constant difficulties of getting what they need when they need it.

Hamilton Beach, a maker of coffee pitchers, blenders and roasting ovens, told investors this month that it expects supply chain constraints and high transportation costs to continue through this year. Executives plan to raise prices in response, an illustration of how supply lines are fueling the highest consumer price inflation in 40 years.

“If you look at the Port of Los Angeles, you don’t see relief in sight yet. It will take more time to resolve these bottlenecks in the supply chain,” said Michael Wax, CEO of Forto, a Berlin-based shipping company.

After declining late last year, the cost of sending a standard shipping container from China to Los Angeles has risen 20 percent over the past two months to $1,6353, according to the Fritos Index.

That’s more than 12 times the cost in the months leading up to the pandemic.

The recent rise in oil prices has not helped. The price of a metric ton of low-sulfur fuel used by marine cargo ships topped $1,000 earlier this month, double what it was before the pandemic.

Supply lines were already stretched when Russia invaded Ukraine on February 24.

Aside from Russia’s role as a supplier of oil and gas, Russia is not as important to the global economy as China. But the fighting and sanctions that suddenly cut the country off from routine commerce are sending shock waves through the shipping channels.

as Penalties The number of container ships parked in Russian ports on the Baltic Sea, including Saint Petersburg, began declining this month, by 40 percent, according to data from Windward.

Nearby ports in Estonia, Latvia and Germany saw a roughly similar increase in traffic, as ships were diverted from Russia.

Many shippers bypass the prohibitions detailed in the US-led sanctions. Some companies avoid Russian-flagged ships. Others refuse to charter a Russian-led ship.

“What we’re seeing is more turbulence, more crowding, more delay,” Daniel said. “This will not change.”

Major shipping companies have stopped accepting new shipments to Russia, Ukraine and Belarus. Maersk offloaded cargo that was halfway to Russia when the war began at a small Danish port, in Kalundborg, according to Jan Tiedmann, senior shipping and port analyst at Alphaliner Information and Research.

In an advisory report published on its website, Maersk said European customs authorities’ inspections of goods destined for Russia are causing goods to accumulate in regional centers and spread delays across the carrier’s global network, “affecting our customers’ supply chains.”

The shipping line said in a customer advisory report that Hapag-Lloyd is dropping a Russia-bound shipment at Black Sea ports, such as Constanta in Romania, Burgas in Bulgaria and Gemlik in Turkey.

Sanctions basically built a wall around Russia. Goods that normally traveled on railways between China and Europe are now transferred to ships or planes. On an annual basis, about 1.5 million containers could be affected, according to Niels Larsen, who heads the North American operations of DSV, a Danish transportation and logistics company.

But these shipments will add to the current congestion. Space on container ships is already at a higher price. Larsen said planes flying from China to Europe must turn around closed Russian airspace, adding up to six hours of travel time and requiring, in some cases, additional refueling stops. This effectively reduces capacity for air cargo channels that are already operating at much lower levels than pre-pandemic levels. And when the plane lands, they’ll dump their loads in the airport’s already crowded cargo handling operations.

“This will have huge ripple effects that no one has prepared for,” Larsen said. “We’ll go back to the early days of coronavirus, when it got really bad.”

at China, the government imposed severe coronavirus restrictions on more than 50 million people in major cities, including Shenzhen, Shanghai and Changchun, starting March 13. Companies in the affected regions account for three-quarters of China’s exports, according to Capital Economics.

These moves came amid a worrying rise in omicron-type infections from the Corona virus. Under China’s zero-tolerance policy, only a small number of cases are enough to impose severe restrictions on activity.

More than 50 Chinese factories in the electronics, auto and consumer products industries have closed this week, according to Everstream Analytics, a supply chain risk analysis firm.

Capital Economics warned clients this week that “the risk of severing global supply chain links within China is the highest in two years.”

While southern ports remain open, nearby warehouses are closed and trucking services are limited. In Yantian, coronavirus testing has cut trucking capacity by more than half, according to Everstream. Some of the shipments that normally cross the border into Hong Kong by truck now make the short journey by sea.

Ships wait two days to dock there while nearby Chico won’t accept ships until March 19, when the wait on reopening is expected to be three days.

“We expect six to eight weeks of manufacturing backlog, shipping delays, and congestion,” said Julie Gerdman, CEO of Everstream. “We will likely feel the effect of this within four weeks.”

By the end of the week, Chinese authorities had allowed Foxconn and a number of other manufacturers to resume operations using a “closed-loop” system, moving workers between company-provided housing and the factory.

Chinese shipments are already taking longer than ever before to get from the factory gate to the port of departure, nearly three times as much as before the pandemic, according to data from Flexport, a San Francisco-based shipping company.

In the short term, a slowdown in goods from China will be good news for California ports that still face traffic congestion for incoming ships. But once Chinese factories and ports return to normal operation, a wave of sea traffic will head to the West Coast, executives said, potentially exacerbating existing bottlenecks.

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