Manufacturing orders from China down 40% in demand collapse

Aerial view of containers being loaded at Qinzhou Port on August 15, 2022 in Qinzhou, Guangxi Zhuang Autonomous Region of China.

China News Service | Getty Images

U.S. shipping officials are planning to delay shipments from China as early as January due to restrictions on shipping and shipping by ocean carriers.

Carriers have been using the service management system to announce empty flights and stop service to meet their needs. “The continued decline in freight rates from Asia, due to the fall in capacity, is forcing ocean carriers to be more resourceful than ever as fleet utilization declines,” said Joe Monaghan, CEO of Worldwide Logistics Group.

US manufacturing orders in China have dropped by 40 percent, according to the latest CNBC Supply Chain Heat Map data. Due to the lack of orders, Worldwide Logistics tells CNBC that it expects Chinese factories to close two weeks earlier than usual for Chinese New Year – Chinese New Year will fall on January 21 next year. Seven days after the holiday is considered a national holiday.

“Most of the manufacturers will be closed in early January for the holidays, which is much earlier than last year,” Monaghan said.

The supply chain research company Project44 told CNBC that after reaching the highest level of commercial disruption during the pandemic lockdown, the TEU (twenty-foot equivalent unit) shipment from China to the US has dropped significantly since the end of the summer of 2022 – including a decrease. of 21% in total shipping volume between August and November.

Asia-based international company HLS has warned clients in a recent communication about the maritime business climate.

It seems to be a very bad time for the shipping industry. “We have a combination of declining supply and increasing supply as new tonnes enter the market,” it wrote.

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HLS analysts are predicting a further 2.5% decline in container volume and an increase of around 5-6% in 2023, which will continue to affect commodity prices in 2023.

“The container shipping market will be extremely challenging due to economic uncertainty, global concerns, and increasing market competition,” wrote HLS.

OL USA CEO Alan Baer tells CNBC that there are early signs of a product overhaul. A growing number of businesses and order releases in Asia continue to be closed as carriers cancel more ships, and there is little guidance in the lead-up to the Chinese New Year. But Baer said, “Space is already strong, so even though the demand is soft, the space could be very important in January and throughout Q1. On the other hand, the shortage of products and the need to restart the order and deliver seems to be going up. .”

US West Coast ports are the most successful

HLS cited trade data showing that US cargoes from Asia fell in October to the lowest level in 20 months. The container rate from Asia to the US West Coast has crossed the breakeven point, “with limited opportunities,” it wrote.

The West Coast’s major ports of Los Angeles and Long Beach have seen a sharp decline in trade, according to Josh Brazil, vice president of product marketing at Project44, as shippers have rerouted some of their shipments to the East Coast to avoid the crash. Massive union strike at West Coast ports.

HLS expects most carriers to increase their West Coast rates through December 14, holding $1,300-$1,400 per forty-foot equivalent container (FEU). However, US East Coast prices are expected to drop by $200 or $300 to around $3,200-3,300 per FEU in the first half of December.

The recent increase in Covid Lockdowns in China continues to affect manufacturing operations and delay shipments. There are also local barriers to cross-county and inter-city transport, particularly related to driver testing, and traffic volumes are greatly affected.

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Struggles for ship space, inventory rollovers, and slow flows are tracked by the CNBC Supply Chain Heat Map.

The downloaded (restricted) data shows the slowness of the vessel on the transit route (from China to the US) continuing at high speed. Maersk’s 2M partnership with MSC has suspended nearly half of its US West Coast operations in December. The Ocean Alliance (CMA CGM, Cosco Shipping, OOCL and Evergreen) and THE Alliance (Ocean Network Express, Hapag-Lloyd, HMM and Yang Ming Line) cut the total capacity of ships by 40-50% until the Chinese New Year.

As a result, the shipping facilities are considered to be tight to take cargo to the Pacific Southwest and the reliability of the service has decreased, with carriers including MSC and Hapag-Lloyd rolling (not accepting) cargo during the trip in an attempt to make time. According to transport managers, this is creating two weeks of delays. MSC said in its latest statement to customers, “ETAs are indicative and subject to change without notice.”

How the Covid restrictions affect business

The drop in manufacturing regulations from the US and the EU is also affecting Vietnam, which has been growing as a manufacturing hub as more and more trade is moving away from China.

Since the beginning of this year, 12,500 companies have been closed every month, an increase of 24.8% year-on-year, according to a report by the Vietnam General Statistics Office. The combination of a lack of manufacturing regulations and high interest rates from 6.5% to 13.2% in Vietnam led many companies to close factories rather than sign new contracts, according to HLS. Stopped cruises to Vietnam increased by 50% in December.

A surprising increase in Europe

In contrast to the decrease in orders from China, the trade analyzed by Project44 shows that the route from Europe to the US “is one of the most surprising and important from the beginning of 2020,” said Brazil.

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“This huge increase cannot be explained by the pandemic alone. But the strategic shift away from over-dependence on trade with China and international tensions over Russia are the main drivers of EU-US trade growth,” he said.

The global trade map is rapidly being redrawn, with EU-US trade and investment in the US rising sharply as economic ties between the West and China come under intense scrutiny. This year, the US has imported more goods from Europe than from China – a big change from the 2010s, according to Project 44.

“For them, European producers who are struggling with high energy prices and high commodity prices are increasingly exporting and investing in the US,” Brazil said.

German exports to the US were about 50% higher in September than the year before. Germany’s mechanical engineering sector has expanded its sales to the US by nearly 20% annually compared to the first nine months of 2022, according to Project 44.

CNBC Supply Chain Heat Map data and intelligence provider and forecasting company Everstream Analytics; global logistics platform Freightos, developer of the Freightos Baltic Dry Index; property agent OL USA; Supply chain intelligence platform FreightWaves; Blume Global sales platform; Third party property agent Orient Star Group; global maritime analytics provider MarineTraffic; visual data company Project44; shipping data company MDS Transmodal UK; marine and air inventory and market analysis Xeneta; leading research and analysis provider Sea-Intelligence ApS; Crane Worldwide Logistics; DHL Global Forwarding; Seko Logistics logistics provider; Planet, a provider of global, daily satellite imagery and geospatial solutions, and ITS Logistics provide port and rail towing services in 22 coastal ports and 30 rail hubs across North America.


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