MNI INTERVIEW: China Export Container Shortage To Improve

China’s shipping container shortage, which caused a recent 260% spike in the China-EU freight cost index, will continue to disrupt global trade but improvements over March and April will help avoid a supply side-shock to the world economy, a leading Chinese shipping expert has told MNI.

The container shortage will improve as the arctic sea route opens, Panama canal water levels improve, congestion at South African ports resolve, and bad winter weather through the Tsushima and Korea Straits subsides, said Xu Kai, chief information officer at the Shanghai International Shipping Institute.

“Currently there is a shortage of containers and warehouses are filling up in China’s coastal cities caused by increased transit times around the Red Sea,” Xu added, noting the spring festival holiday had eased pressure. Additionally, EU and U.S. buyers had boosted orders to increase buffer stock, which exacerbated the shortage, Xu noted. Tightness will return in the short term should the Red Sea conflict continue, he added.

Detours around the Cape of Good Hope have reduced shipping container global effective capacity by 6%, according to data firm Sea Intelligence. A lack of containers and shipping space has also pushed the China Containerised Freight Index (CCFI) up 155% since the start of January, with the China-EU subindex up 260%. The Drewry World Container Index, which tracks freight costs of 40-foot containers along major routes, reached USD3,786 last week, up from just over USD1,500 at the start of the year.

EXCESS CAPACITY

Xu, also director of the China Port and Shipping Big Data Laboratory, noted the significant oversupply of containers from before the conflict began had mitigated the supply-chain impact. “Policymakers should be cautious about adding new containers too quickly,” he said, noting the global glut could be worse than ever should the Red Sea conflict end quickly.

Danish shipping company Maersk has begun adding new containers amid a recent capacity shortage caused by the conflict, a public relations representative from their Singapore office told MNI.

“It's important not to overreact at the moment,” Xu said.

China’s international trade will rebound in 2024 despite the strengthening yuan and Red Sea shipping disruptions, as the world economy stabilises, geo-political tensions cool, and Beijing diversifies its trading partnerships, a policy advisor told MNI recently. (See: MNI INTERVIEW: China Trade To Hit CNY44-45 Trillion In 2024)