Author: GPSM

China’s power crisis is expected to further disrupt supply chains bringing longer lead times and a preference for high-value goods.

Last month, factories across Guangdong’s Pearl River Delta manufacturing heartland and nine other provinces were forced to cut output due to government-imposed energy caps.

According to Jacky Yan, founder and CEO of Chengdu-based New Silk Road Intermodal, the power cuts have already had a “big impact” on manufacturing, combining with the usual Golden Week lull to trigger a rare dip in container freight rates.

“And there’s still no certain answer when the shortages will end,” he told The Loadstar.

A combination of factors are putting extreme pressure on China’s energy consumption, Mr Yan explained. First, coal and gas accounts for three-quarters of the country’s energy usage and import prices have surged in recent weeks.

“With increased rates for coal and a relatively fixed electricity price, the energy firms have been losing huge amounts of money every day. So they have the temptation to produce less electricity,” he said. “Furthermore, winter is the dry season for the main rivers, which leads to less hydropower. Winter also means the government needs to prioritise the supply of electricity for heating and consumption.”

Another cause of the energy shortage is China’s emission targets, Mr Yan added. Since the country had used most of the quota set by the government in the first nine months of the year, there was now the need to pull back.

“Lastly, with the Covid outbreak in South-east Asia, many labour-intensive manufacturing, with high-energy consumption, was temporarily moved back to China, but this is not what the government wants, so we have tighter controls on this as well.”

Indeed, set out in the Made in China 2025 plan, Beijing has been heavily focused on moving manufacturing higher up the value chain and discouraging the low-value production said to be a major source of emissions.

One Shanghai-based forwarder said: “If the crisis continues, it will reduce manufacturing output significantly and lead to lower export cargo volumes and longer lead times. For example, some manufacturers have started giving priority to orders for higher-value goods.”

Not all forwarders are seeing a major impact, however. Stefan Holmqvist, MD of Norman Global Logistics Hong Kong, noted there have been previous power shortages in China, due to hot weather or production spikes due to high demand.

“But this is ongoing, with adjustments to allotted production days in many provinces,” he said.

LCL and Airfreight Trucking Charges:

GPSM has had fixed LCL and airfreight trucking charges in Australia for some 8 years without any cost increases being passed to clients.

We were looking to introduce a general rate increase earlier this year but in light of the escalating COVID situation we again postponed any increases.

Unfortunately the situation in LCL and airfreight cargo depots has not improved this year with extensive delays on a daily basis with waiting on average 4-5 hours for trucks to be loaded, despite being at the depots from around 5am, sometimes earlier.

We regret the need to increase any costs but it is now to a point where we are unable to cover the escalating costs, naturally we do wish to continue providing a premium service in all states, and in order to do so, effective from 1st October, 2021 we shall be forced to implement increased trucking charges. Many of our interstate sub-contractors increased the rates earlier this year and we cannot continue to absorb those increases.

The average increase is around 7.5% and revised rates will be added to the GPSM charges module, rates in Fremantle will reflect a larger increase due to the on-going and disruptive industrial action at Fremantle port/depots and the complexities of LCL deliveries in WA.

FCL Trucking rates:

FCL trucking charges in some states were increased by most trucking companies between 1st February and 1st April, 2021 by way of base rate or fuel levy as a result of the increased cost of diesel fuel, now up by some 13% since mid-2020.

The issues we have faced with empty container depots, port congestion, terminal COVID outbreaks and often needing to transfer containers to our yard in late night “stack-runs” to avoid the daytime port delays, have all led to increased operating costs.

Again, GPSM have not passed on any increases in the past 4-5 years, rather we have tried to negotiate better rates or absorb most of those cost increases over this time, and while some of our interstate trucking partners have assisted us slightly, we cannot continue absorbing losses and still provide clients with a premium trucking service.

From 1st October, 2021 we will be left with no alternative but to implement a general rate increase of approximately 7.5% for Metro Area rates, the new rates will be updated to the GPSM charges module.

Many Shippers are regularly asking why Air and Sea Freight Rates seem to be on a never-ending climb to the heavens.  A lot of this has to do with the lack of airfreight space. Commercial aero planes are responsible for bringing in vast tonnages of cargo in their underbellies . The lack of flights has contributed to the push for more sea fright shipping

The attached chart explains the dramatic decrease in flights and its imp[act on Air Freight . It also explains why companies are importing and exporting more by Sea

Australia’s Patrick Terminals are again set to endure another round of Protected Industrial Action by Maritime Unions at a time when importers and exporters are struggling under current lockdowns and difficult economic environment.

A ban on overtime and a ban on performance of upgrades and/or work in higher level will be imposed at Sydney and Brisbane Autostrad Terminals from 10pm Friday 1st October until 6am 5th October. In addition, work stoppages will be applicable for 24hours on Saturday and Sunday 2nd and 3rd October, 2021.

Patricks Melbourne Autostrad Terminal will have a ban on overtime from 23rd September until 7am Thursday 30th September, 2021.

Patricks Fremantle Terminal will stop work from 11pm Friday 24th September until 11pm Sunday 26th September, 2021, as well as a ban on attending work when an employee is rostered as “off/avail” working overtime from 7am Tuesday 28th September until 7am 19th October, 2021..

Melbourne VICT Terminal Closed:

A second COVID outbreak closed VICT Terminal in Melbourne on Wednesday this week, latest update indicated the terminal would remain closed today, Friday 24th September 2021.

Xiamen, China Port:

Xiamen City has been locked down due to a COVID outbreak, as a result of the lockdown, depot and trucking operation have been abruptly halted. Terminal operation in Xiamen port has also been impacted but loading and discharging activities are continuing, for cargo already received at the terminal, as long as vessels are calling Xiamen port.

USA West Coast Ports:

Ports on the West Coast of USA, particularly Los Angeles and Oakland continue to suffer heavy congestion, last reports indicate 56 vessels are anchored off Los Angeles port awaiting a berth to discharge and load, this is the highest number of vessel to date at anchorage with congestion in the port and rail terminals extremely chaotic and severely affecting operations.

GPSM Transport Team will advise any clients affected by the Industrial situation on a case by case basis.

The Port of Los Angeles has been experiencing unprecedented congestion as the Transpacific trade-lane has exploded to record high volumes.

In order to ease some of the congestion, the Port of Los Angeles is expanding their hours of operations during which trucks can pick up and return containers.

Additionally, the port is looking to implement 24/7 operations which will help move the congestion that is stalling vessel berthing.

Total Terminals International container terminal on Pier T in the Port of Long Beach is making it easier for trucks to access the facility during the overnight hours in a new pilot program to widen access and speed deliveries amid the ongoing cargo surge.

The pilot program at the Port’s largest terminal focuses on the effort to reduce “dwell” – the amount of time cargo spends waiting for pickup on the dock. The terminal is taking two significant steps to increase cargo pickup in the late night, early morning hours, when there is less traffic on the region’s freeways and surface streets.