A covid outbreak in China provokes fears of trade disruption

An outbreak of Covid-19 in southern China is holding back activity in some of the country’s largest ports, sparking fears that a further disruption in international trade could increase the price of its exports.

Since the end of May, more than 100 new cases have been reported in Guangdong Province, one of China’s most important manufacturing centers, which has sparked strict government countermeasures.

Processing at the Yantian container terminal in Shenzhen, which suspended exports for nearly a week last month after workers tested positive, has plummeted. There has also been a sharp decline in the number of ships berthed as authorities implement coronavirus prevention measures.

The slowdown at the terminal, which has worsened congestion in the nearby Chinese ports of Nansha and Shekou, highlights the vulnerability of global shipping to outbreaks in the country, where new infections have been low compared to other major economies during the last year.

“It’s about the size of the terminal,” said Lars Mikael Jensen of Maersk, the international shipping company. “It’s an active terminal in every market, one of the largest in the world and it has a kind of wavy effect.”

It is also accumulating pressure on China’s own trade behavior, which has grown under the pandemic amid growing overseas demand for blockchain-related products, such as electronics and home appliances. China’s growing exports have helped support its exports fast recovery since the first economic success of Covid-19.

This week’s official data showed that Chinese exports rose 27.9% year-on-year in May, compared with a low base last year. But expectations of a 32.1 percent increase were lost, according to a Bloomberg survey of economists, and analysts suggested that future performance could be weakened by the disruption.

“We expect June trade and production data to be affected,” Iris Pang, China’s chief economist at ING, said. “This could raise overall electronics prices and affect China’s export prices and ultimately import prices to the US and Europe.”

Worldwide shipping has suffered a number of tensions over the past year, including shortage of containers and problems with crew members not being able to disembark at ports. In China, some manufacturers do he went to the railroad to transport his goods to Europe in contrast, although volumes remain a small fraction of maritime trade.

“Other ports in China are also likely to be more cautious,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “Due to the pandemic in India and the economies of Southeast Asia, the shortage of ships, rising commodity and shipping costs, this increase in Covid cases in Guangdong may contribute to pressure higher inflation in other countries “.

“I think that’s just the beginning. We may not be as lucky as last year, ”said Penny Cheng, a Shenzhen shipping agent, who said the shipping schedule had been delayed at the city port.

Local authorities are extremely sensitive to any increase in cases, as the central government has severely sanctioned provincial officials where Covid-19 has reappeared. All Guangzhou residents have been forced to take a test and cities across the province have prevented people from leaving if they refuse.

Additional Qianer Liu reports in Shenzhen