On a typical November day, Mr. Hu's tennis ball factory would be in full swing. But the days in Mr. Hu's business were long gone. And it is not for lack of demand. Their tennis balls tend to end up all over Europe.
Orders to its factory in Guangdong, China's largest manufacturing center, have returned to their pre-pandemic level. But power outages at his factory since September have slowed production
. Besides time, that costs a lot of money. The manufacturer pays four times more for the electricity of the generator that it has had to install so as not to suspend all production.
Bottom line: Mr. Hu's tennis balls are now more expensive and reach their final point of sale later, which in turn has raised the consumer price.
The blame for the delay lies in the fact that when the balls reach the containers at the port, there is a lack of manpower.
It is not that there are not enough dock workers or sailors, but that half are usually quarantining.
These employees spend
21 days confined to a hotel for every two weeks of work
.
It is the policy of Beijing in the face of its obsession that workers are constantly exposed to Covid through the supply chain.
Since last year, Chinese politicians have been handling the theory that the coronavirus could reach their country through frozen food imported from other countries.
In Guangdong, the American Philip Richardson also has a loudspeaker factory that usually ends up in Europe and the United States. Richardson has been grappling for the past three months with the port labor issue and power outages. For the same reason, around
150,000 companies from this province
have passed
to southern China, affected by energy rationing.
China tries to cut carbon emissions, but cuts in coal production have led to record prices.
Richardson's loudspeakers are often sold at stores like Alto Music's in New York. Business owner Jon Haber says he
's paying nearly five times more for shipping
, so he's had to raise prices. He even assures that he has even sent capacitors - small electronic components - to China due to the shortage they have there to manufacture their products.
The journey of a container from China to the US or Europe should not take more than two weeks. At an
hour, around 70 days pass from when the product leaves the manufacturing site until it reaches the point of sale
. "Every week it's a battle for us to try to get the product onto the ships," says Nick Mowbray, co-founder of Guangdong-based toy factory Zuru Toys. "Container prices have skyrocketed. A container from China to the UK cost around $ 3,000 (2,600 euros) and now the price is over $ 20,000 (17,000 euros)," says Mowbray.
As reported by 'The Guardian' from the United Kingdom, the competition for space on ships is so tight that some retailers have waited up to four months for the toys made by Mowbray to get on a container ship. In that period of time, their factories have been filled with stock already sold.
"In some cases we have to stop production because there is no more space to store the products,"
says Mowbray.
It is a
perfect storm.
It began with the arrival of the pandemic and the closure of production plants in cheap manufacturing centers such as Malaysia, Thailand or Vietnam. Countries around the world concentrated their orders in China, which quickly kept the outbreaks under control and has eight of the ten most important ports in the world. Then,
economies reopened and demand increased, but the rate of loading of Chinese ports was interrupted because in the Asian giant there was not enough energy to power factories, port controls had become increasingly harsh
with the new Outbreaks and the arrival of the summer typhoons didn't help either.
"
The problem of supplies is a question directly related to value chains,
which twenty years ago were concentrated around a Euro-Atlantic axis, and at what time are they being displaced by another Euro-Asian axis. China occupying a central value in global value chains (with the second highest index in the world after Germany), any variable in this country can affect supply chains. And, therefore, the availability of certain final goods " , explains Alberto Lebrón, economist and researcher at the Institute of Economics of the University of Peking.
"China has had its borders closed since March 2020.
It is inevitable that this will have direct consequences on the cost of sea and air transport.
But the increase in exports from China since September has been brutal. They are now increasing prices on top, which translates into more inflation for the rest of the world. They are playing with fire because people are already beginning to wonder why they have to pay more for products when it is China that has made the decision to close its ports ", says Alicia García Herrero, Asia-Pacific Chief Economist for Natixis Corporate Bank.
According to the latest October data from Project44, a platform for freight forwarders and logistics service providers,
there were approximately 386 ships anchored at the terminals of the Shanghai and Ningbo ports
. The former is the world's largest port by volume, while Ningbo, the third busiest, was closed for most of August due to sanitary restrictions. Another major port, Yantian in Shenzhen City, was closed in May and June.
A few days ago, from the Global Maritime Forum they protested in a statement about China's growing restrictions that, as it tries to maintain a zero Covid policy, make it increasingly difficult to embark and repatriate sailors. "
Blockades and isolation requirements exacerbate problems with crew change.
Chinese shipyards have to be manned by domestic seafarers due to the impossibility of bringing foreign seafarers to China," the brief reads.
As
Chinese ports went into a loop of closures and restrictions,
industrial activity slowed in September due to power outages. The country's electricity grid could not meet the demand for coal while complying with the national policy towards a green transition.
Since August,
at least 20 of China's 31 provincial-level jurisdictions have implemented power rationing for a stable power supply
, which has been hampered by coal shortages and aggressive restrictions to meet emissions targets. Added to these problems was the shortage of containers due to the lack of aluminum (80% of consumer goods are transported by sea). But energy demand has continued to rise amid record Chinese exports.
China continues to run a trade surplus despite global supply chain problems.
Exports marked another significant year-on-year increase in October.
Data from customs authorities released on Sunday show that exports grew 27.1% year-on-year to $ 300.2 billion.
It is the thirteenth consecutive month of double-digit growth, remaining well above pre-pandemic levels throughout the year.
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