power shortages in china

China’s rebound from the pandemic and steady rise in factory production throughout the second half of 2020 is resulting in an unforeseen power surge affecting factories, offices and even street lights in some areas. As a result, the Chinese government is cutting power in some provinces and requesting Central China factories to start their Chinese New Year holiday on January 15th, more than a week sooner than normal. The Chinese New Year is on February 12th this year.

At this point, the enforcement is considered a request and varies by province. In Hunan and Jiangxi Provinces, early closures could be widespread with “recommendations” on power savings being the most strictly enforced. Throughout Central China and in particular in Zhejiang Province, factories are stepping up production to try to push out as many orders as possible prior to The Chinese New Year. During the next two weeks, vessel space could be extremely tight, in particular from Shanghai and Ningbo.

Surges in Covid Cases

Meanwhile in Northern China, a recent surge in reported Covid cases has caused government shut downs of many factories as well as labor shortages at the port of Dalian. For a time last week the port was shut down completely, but it’s now operating with a greatly diminished labor pool. This has exacerbated port congestion with vessel turnaround times deteriorating and many vessels waiting for berth. Certain factories continue to be closed but some exceptions have been granted. For example, those producing PPE are allowed to stay open so long as provisions are made for factory workers to remain on the premises 24/7.

vessel space crunch and rate increases

Covid closures and power shortages can be added to the seemingly never ending list of factors which have caused vessel space and equipment to be incredibly scarce and upward pressure on ocean rates to be continuous.

Some carriers have already announced another round of rate increases for January 1st. Others are still holding off, adding to the uncertainty of January rates. More clarity on this issue is expected within the next 24-48 hours. Rates to date have already reached unprecedented levels. Rates on the TransPacific US West Coast are approaching $5,000/40’ and rates to the TransPacific US East Coast are approaching $6,500/40’. On top of these high ocean rates, carriers have continued to increase the fees they charge for space guarantee. These surcharges in some cases are now as high as $2,500 – $3,000/40’.

Simultaneously, rates from the Far East to Europe are climbing at an even faster pace and to a higher rate. Rates from the Far East to the UK have been reported to be over $13,000/40’.  Some terminals in the UK suspended the offloading of containers with only pick up of empty containers allowed. This caused the need for many Felixstowe containers to be off loaded in France and trucked to the UK, in an effort to meet the Brexit dead line at year end. As of this moment, Southampton is still in normal operation, but with expected delays.

Worldwide Logistics Group will continue to report supply chain challenges as they develop and continue to search for every possible solution to keep our clients’ cargo moving in the most economical and efficient ways possible. Contact your Worldwide Logistics Group representative for more information.