Two weeks after Russia's invasion of Ukraine, there appears to be negligible impact on container prices and leasing rates in China. Container availability improved shortly after the Chinese New Year through Friday at major Chinese ports. However, with the announcement of nationwide closures, the supply chain must prepare for another upheaval in the coming months, which will impede the flow of container movement as importers around the world prepare for the upcoming season. high at the end of this year.

At the port of Ningbo, average prices for a 40-foot container fell by about 10%, from US$5.930 on February 14 to US$5.329 on February 27. As of March 10, these prices stood at US$5.248. Similarly, average prices fell 10-15% at the ports of Shanghai, Qingdao and Shenzhen through March 11. Shenzhen witnessed an 8% drop in the last two weeks.

However, lockdowns in Shenzhen, Zhejiang, Shanghai, Jilin, Suzhou, Guangzhou and Beijing (19 provinces as of Sunday, likely more in a few days) imposed now will clearly heavily restrict container movement at these ports, which, as we know seen in the past, turn out to be even more damaging to the global supply chain. Clearly, 2022 has not brought joy to the supply chain industry. On top of this, the war will only prove to be another disruption among the myriad other factors for China's supply chain.

“Freight rates and container prices were already at a record level even before the invasion started and what happened immediately because of the war is that the national shipping lines were no longer calling Russian ports, the Sea Negro was closed in some way, and the Asia European Railway is quite affected by this. The immediate impact of this on the overall supply chain has not started to manifest," noted Dr. Johannes Schlingmeier, co-founder and CEO of Container xChange.

He added that: “Not ignoring the fact that Russia's importance in world trade is not great enough for containerized cargo to really disrupt supply chains. We see, on the other hand, container prices at record levels, containers piling up and also massive shortages. This is the result of many other disruptions in the last two years since the pandemic began.”

“Lockdowns in China will further reduce capacity and cause already inflated shipping prices to spike. The shock waves will be felt in the US and America, and almost everywhere in the world,” Schlingmeier said.

For the foreseeable future, the closure of the Asia-Europe rail (which only accounts for about 2,5% of Asia-Europe cargo) will see high-value cargo shift to ocean freight, which is already under capacity. This will put more pressure on the already struggling supply chain. On top of this, China's lockdowns will be nothing short of a huge shock wave to an already crippled supply chain.

If industry reports are to be believed, China could emerge as a buyer of Russian crude, which could help alleviate some of the current global supply concerns, as the EU could, in turn, buy more than Middle East. With the COVID outbreaks and subsequent lockdowns, this expected increase in trade will slow down for at least a few weeks or months.

In addition, there are medium- and long-term implications that analysts anticipate, such as the disruption in trade in goods and increased efforts by the US to insulate itself from geopolitical impacts on international supply chains driven by key sectors of the Chinese economy. . Currently, China controls most of the global market for the processing and refining of rare earths and critical minerals.

The CAx (Container Availability Index) for two of China's major ports (Shanghai and Ningbo) is expected to rise further at a fairly rapid pace from around the 0,6 mark in the second week of March, which which means more containers incoming than outgoing. It is unusual for this Asian giant to normally export more than it imports, exhibiting the persistent bottlenecks of its trade routes and the bottlenecks that will inevitably arise from these closures, said Container xChange.