China’s Trade Surplus In Jeopardy As Peak Season Ends

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China enjoyed a record $101bn trade surplus in July, but cargo volumes could soon decline, due to “cooling demand” and “no peak season” for Asia-Europe trades, says an article published in The Loadstar.

Backlog of orders

According to Chinese customs statistics, last month’s exports jumped 18% in US dollar terms, while imports grew 2.3% year on year.

However, Julian Evans-Pritchard, senior China economist at Capital Ecomomics, said in a research note: “Exports held up well last month, thanks to a backlog of orders still being cleared. But it won’t be long before shipments drop back on cooling foreign demand.

“Imports continued to trend down, pointing to further domestic weakness.”

Supply chain disruptions

And, Mr Evans-Pritchard noted, the recent strength of exports “reflects the easing of supply chain disruptions coming out of lockdowns and, most importantly, fewer bottlenecks at ports.”

Pandemic-related shifts

Not all verticals are performing equally well, however, Mr Evans-Pritchard pointed out how electronics shipments were “a key exception”, having dropped back considerably this year – “a sign that pandemic-related shifts in global demand are reversing”, he explained.

Weakness of domestic shipping

Activity at China’s ports has picked up recently, he said, throughput being helped by the weakness of domestic shipping demand, which has “freed up more port capacity for foreign trade”.

Unstable epidemic situation

Nevertheless, forwarders are still reporting pockets of delays and congestion at Chinese ports, partly due to ongoing Covid restrictions.

Taiwan’s Team Global Logistics (TGL) said delays at Shenzhen, for example, were becoming “more serious”, and additional costs had “become normal due to the unstable epidemic situation”.

Haulage operations

TGL said there were vessel delays of seven to 10 days at Shanghai, where Covid policies were “constantly changing” which had a major impact on haulage operations.

Meanwhile, the Chinese military exercises near Taiwan were causing worsening delays at Ningbo and delays of three-to-five days from Qingdao, added TGL.

Lockdown policies

FourKites added: “As several large Chinese cities have been rolling out more stringent lockdown policies, volume at the port of Shanghai has started to decrease since the peak in mid-July, down 19% since then. The 14-day average ocean shipment volume is now down 14% compared with 12 March [when the lockdowns began].

Blank sailings

Indeed, according to Flexport, freight rates are falling on both the transpacific and Asia-Europe trades, despite widespread blank sailings.

And, Flexport added, while Asia-Europe “supply is still relatively tight due to the large amount of blank sailings, vessel slidings and port omissions”, there was “no peak season and demand has been slowing down.”

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Source: The Loadstar

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