China port closures to delay Christmas shipments, stall production in Singapore

SINGAPORE – If you celebrate Christmas, you may want to start gift shopping for the season now.

With several terminal closures at China’s key ports recently, the queue of container ships now waiting to unload cargo and clear customs could last for another three to four months. This means imported goods, from gaming consoles to running shoes, could arrive in Singapore by the time Christmas is over, said Mr Mick Aw, senior adviser at consulting firm Moore Stephens.

Shipping delays have also stalled the production of electronics and driven up freight rates, exacerbating cost pressures on construction firms in Singapore.

China last Wednesday (Aug 25) reopened the Meishan terminal at the eastern Ningbo-Zhousan Port after it was shutdown for two weeks when a worker tested positive for Covid-19.

A backlog in global deliveries caused by the closure as ships were rerouted to other Chinese ports is still being cleared. Ningbo-Zhoushan Port is among the busiest ports in China. Last year, it handled almost 1.2 billion tonnes of goods, according to the Chinese media. In fact, shippers are still clearing the cargo backlog accumulated from the weeks-long shut down of the Yantian Port in Shenzhen in May.

China’s port closures come after more than 400 vessels were stranded at the Suez Canal when the giant container ship Ever Given was wedged across the vital waterway on March 23, causing delays around the globe for weeks.

“Port congestion has slowed the rotation of vessels and clearing of cargo, causing longer transit times as well as reduced effective capacity of the vessels. When the vessels subsequently arrive at the ports outside their normal scheduled windows, it further adds to the disruption in subsequent ports,” a spokesman for Singapore shipping line PIL said.

PSA Singapore, being a major transshipment hub port and key node in the global supply chain, has not been spared from such disruptions. “We have been working very closely with our shipping line customers, helping them to catch up on their vessel schedules and fulfil cargo connections,” a PSA spokesman said.

Mr Aw said the disruptions are delaying shipments of important raw materials like steel and copper to Singapore, adding to the rising costs of construction and eating into margins.

Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said semiconductor chips and other components vital to manufacturing and electronics have also been affected, which could stall production at a time when demand is seasonally high ahead of the Christmas season.

Currently, the gap between ordering a semiconductor and taking delivery has risen by more than eight days to 20.2 weeks in July from the previous month, according to trading and technology firm Susquehanna Financial Group.

Ms Ling said: “If manufacturers cannot ramp up production to meet demand due to material delays or shortages, that will impact revenue and earnings going forward.”

She added that the “higher logistical costs due to supply chain disruptions are not helping”.

She said major chip manufacturers like NXP Semiconductors have “rapidly drawn down their inventories” and both Apple and Samsung Electronics have also warned of component shortages which could affect shipments of goods during the peak season.

These delays are expected to continue until next year on the back of strong demand. Electronics maker Hon Hai Precision Engineering has said the material shortages will last until next year.

Mr Aw said global container volumes were up 14 per cent by May over the same period last year. This is due to “pent-up demand after months of Covid-19 lockdowns, inventory restocking, shifts in consumer activity towards goods due to services being restricted by Covid-19, shipments of fixed assets, medical supplies and home working equipment and strong production in China”.

However, the supply of ships has not kept up with demand and fleet capacity growth has been on the decline, with shipping services provider Clarksons estimating growth of just 2 to 4 per cent annually between now and 2022.

There has also been a shortage of containers, which was already leading delaying shipments since last year, said Mr Jason Chiang, country director at engineering consultancy firm Royal Haskoning DHV.

While consumers in Singapore have yet to see an obvious rise in the prices of goods in malls, experts said it could be a matter of time before inflation starts to tick up.

Mr Chiang noted that rates on the China to Europe shipping route have already doubled to more than US$10,000 (S$13,500) since the middle of last year. Mr Aw added that freight rates between Asia and the United States are up by 400 per cent from last year.

Ms Ling said: “If higher costs of manpower and shipping persist into next year, we might see inflation rise to a point where the central bank takes policy action.”

Written by: Kang Wan Chern