Global demand for Chinese goods has been so strong recently it’s creating a shortage of containers and driving up shipping costs, potentially impeding the nation’s exports in coming months.
Exports have been on a tear since July last year, fueled by pandemic-related purchases like medical masks and work-at-home equipment, including computers. Imports haven’t been growing at nearly the same pace, resulting in a lack of shipping containers returning to China to be refilled and sent out again.
The cost of shipping a 40-foot container to Los Angeles from Shanghai has almost doubled from early June, while the price to send the same box to Rotterdam is now four times higher.
Cost to ship goods soars on higher demand, shrinking pool of empty boxes
The “soaring prices for China’s outward shipments due to a shortage of shipping capacity will weigh on China’s export growth, despite resilient external demand helped by the holiday season and factory lockdowns throughout Europe,” Serena Zhou, a fixed-income analyst at Mizuho Financial Group Inc. in Hong Kong.
The container shortage probably acted as a brake on exports in December, she wrote. The bottlenecks could also worsen as exporters look to front-load shipments ahead of the usual shutdown for the Lunar New Year, which starts in early February this year.
The repercussions of the shortages are being felt across Asia, with a mid-December report from Japan’s trade promotion agency highlighting soaring freight rates and a lack of boxes in Southeast Asia and India.
South Korean’s biggest shipping line HMM Co. said last Thursday that the shortage of boxes and space on ships would likely continue in the first half of 2021. The company has deployed extra ships to the U.S. routes to help South Korean companies ship their goods, and will add another ship to Europe later this month.
Read more: Container Rates, Demand Propelled by Lofty Consumer Spending
“Limited container availability, port congestion and a global economic recovery in 2021 should keep first-quarter rates higher than 2020 levels,” according to a report this week from Patent 2 Product Intelligence analysts Lee Klaskow and Adam Roszkowski.
— With assistance by James Mayger, and Kyunghee Park