China’s Move To Stabilize Covid-19 Disrupted Supply Chains

• Beijing urges container shippers to sign long-term transport contracts
• long-term customers are a major income source for liner operators and, outside China
• many big shippers sign long-term contracts to be assured of stable freight rates and service reliability
• a shortage of containers, due to the slow return of empties, as well as inadequate shipping slots, have placed upward pressure on freight rates
• in the first eight months of this year, China’s foreign trade grew by nearly 24% year on year, of which exports were up by 23%

China’s Ministry of Transport (MOT) is encouraging Chinese exporters to sign long-term shipping contracts with liner operators as a hedge against the unprecedented spike in container freight rates says an article on The Loadstar.

Stabilize supply chains

Spokesperson Sun Wenjian said the ministry viewed long-term container shipping contracts as a means of stabilizing supply chains, which have been disrupted by Covid-19 outbreaks and typhoons in China and port congestion on the US west coast.

Stable freight rates

Mr. Sun said: “Long-term customers are a major income source for liner operators and, outside China, many big shippers sign long-term contracts to be assured of stable freight rates and service reliability.”

China’s foreign trade

In the first eight months of this year, China’s foreign trade grew by nearly 24% year on year, of which exports were up by 23%. However, rising freight costs are a concern. Drewry’s World Container Index showed that last week, the costs of shipping a 40ft container from Shanghai to Los Angeles was 329% costlier, year on year, at $10,377.

Rail freights are alternatives

A shortage of containers, due to the slow return of empties, as well as inadequate shipping slots, have placed upward pressure on freight rates. The tightness in shipping capacity has caused a number of shippers to turn to rail freight as an alternative, with the number of monthly China-Europe freight trains exceeding 1,300 trips in the four months to August.

Source: The Loadstar

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