First, there was a critical shortage of shipping containers due to the pandemic. Then came a massive blockage in the Suez Canal.
Now, businesses and consumers are bracing for yet another shipping crisis, as a virus outbreak in southern China disrupts port services and delays deliveries, driving up costs again.
The Chinese province of Guangdong has faced a sudden uptick in COVID-19 cases. Authorities have moved to shut down districts and businesses to prevent the virus from spreading rapidly.
That’s causing massive shipping delays in major Chinese ports, and jacking up already-high shipping costs as waiting times at berths “skyrocketed,” according to analysts and those in the shipping industry.
“The disruptions in Shenzhen and Guangzhou are absolutely massive. Alone, they would have an unprecedented supply chain impact,” said Brian Glick, founder, and CEO at supply chain integration platform Chain.io told CNBC.
However, combined with the challenges that the global supply chain has faced since this year, shipping is in “absolutely uncharted waters,” said Glick.
Guangdong, a major shipping hub, accounts for about 24% of China’s total exports. It is also home to the Shenzhen port and the Guangzhou port — which are the third largest and the fifth largest in the world by container volume, according to the World Shipping Council.
The first local case of the Delta variant, first detected in India, was found in Guangzhou in May and has since spiked to over 100 cases. Authorities have imposed lockdowns and other measures that constrain the processing capacity at ports.
As different parts of the world bounced back from the pandemic late last year, there was a buying boom that led to containers falling critically short. That caused massive delays in the shipping of goods from China to Europe and the U.S. and drove up prices for businesses and consumers.
Then one of the largest container ships in the world, the Ever Given, got stuck in the Suez Canal and blocked the key trading route for nearly a week. About 12% of global trade passes through the Suez Canal, where more than 50 ships a day on average pass through.
The incident sparked a global shipping crisis and held up $9 billion in international trade a day.
Now, the most recent crisis, in southern China, is disrupting the global supply chain again.
“I think the risk of supply chain disruption is rising, and export prices/shipping costs will likely rise further. Guangdong province plays a critical role in the global supply chain,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management.
JP Wiggins, vice president of corporate development at shipping software firm 3GTMS, told CNBC the port crisis in China will cause much more disruption for the American consumer as many of the affected shipments are destined for North America. In comparison, the Suez blockage had a greater impact on European trade as a lot of the delayed deliveries were destined for Europe.
Wiggins also said consumer expectations will need to remain in “Covid mode.”
“Expect shortages and out-of-stock of all the Asian-made products,” he explained.
Spiking shipping costs have been a direct effect of the crisis.
“Many small- and mid-sized shippers are throwing up their hands as the cost of shipping is surpassing the margins on the products they’re trying to move,” Glick said. “Shipping costs are at all-time highs with anecdotal quotes coming in at 5 to 10 times historical norms. We’ve broken through so many price ceilings that nobody can say where this will peak.”