Shanghai is an extremely important node in the global supply chain, so any disruptions there will, inevitably, have a series of flow on effects throughout the world. Because of the Chinese COVID-lockdowns, locally, in Shanghai, there are issues with a lack of availability of truck drivers and a lack of warehousing, among other things. Export volumes out of Shanghai are therefore likely to reduce.
Forwarders [the people that arrange for cargo to be moved on behalf of people that own the cargo] and carriers [the people that actually transport the cargo] both appear to be reducing services for the carriage of air and marine freight in / out of Shanghai. Meanwhile, forwarders and cargo owners in China may well be directing cargo to alternative ports and airports. For instance, we understand that air freight is being redirected from Shanghai Pudong International Airport to Zhenzhou Xinzheng International Airport (1,000 or so km away).
Ocean shipping is keeping goods moving despite the disruption
On the ocean shipping (marine) side, ocean shipping companies appear to be responding – as they normally do when there is disruption at any given node in the supply chain – by skipping calls at that port, routing ships to other ports, changing the order at which ports are called and cancelling specific sailings. Disruption from Shanghai may also induce ship “bunching”, which is when lots of ships arrive at the same time at the same port. That can put stress on the port and the landside as they find it difficult to handle large volumes of cargo at one time.
While these changes to ocean shipping may seem alarming, in reality these are all standard practices and measures that keep goods moving around the supply chain generally. They avoid ships and cargo getting ‘stuck’ at a disrupted port. This ability to change and adapt to disruption means that the international supply chain is, in fact, very resilient to disruption. Given the size of the planet, the number of ports handling cargo, and the myriad issues going on in the world at any given time, there is nearly always disruption somewhere on the globe to at least some nodes in the supply chain. If a particular node in the supply chain suffers disruption, then ocean shipping simply works around it.
We saw just how resilient ocean shipping was in the last couple of years – despite global lockdowns, despite governments preventing the free movement of seafarers, despite the epidemic, despite the huge port congestion around the world, shipping nonetheless kept on delivering the goods.
We anticipate that, despite the current disruptions in China, shipping will continue to deliver goods to and export goods from, Australia. While there may be higher costs for some shippers, importers and exporters who have cargo routed through Shanghai, it appears that, generally, overall costs in the ocean supply chain are currently declining. The cost to ship cargo, and the cost of operating a ship, are both generally on a downward trend at the moment owing to a combination of a greater supply of ships and less port congestion.
What’s the problem in Australia?
Perhaps of more interest to Australians is that, currently, there are delays of variously, up to three days, five days, and ten days at different Australian ports. Delays at Australian ports are unrelated to the issues in Shanghai and it has long been noted that Australian ports are not internationally competitive. Our economy is highly dependent upon the smooth flow of cargo through our ports. About 1-in-5 Australian jobs are directly or indirectly supported by our international trade. That trade accounts for about 46% of our gross domestic product. About 99.92% of all cargo by volume and about 84% by value pass through Australian ports (the rest goes by air).
These delays at Australian ports effectively impose costs on all Australians. Whether they’re farmers, miners, supermarkets, other retailers, businesses, or families, port delays are unnecessarily costly to Australians no matter who those Australians are or how far away they work or live from the sea.
