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Peak Season Demand Looms as Yantian Tackles Huge Backlog


Shippers using the world's busiest port of Shenzhen have struggled to get their loaded exports out over the past month, with carriers omitting calls at Yantian to avoid lengthy delays. Photo credit: Shutterstock.com.




Shenzhen's Yantian International Container Terminals (YICT) will resume full operations early Thursday, but the huge backlog of boxes stacked up during four weeks of severe congestion will need to be flushed out on top of growing peak-season demand.


Hutchison Ports Yantian, the operator of YICT, said in an advisory Wednesday that the COVID-19 infections that closed the west port area and reduced operations in the east port to 30 percent, were now "in control" and the operational capacity of the terminal has recovered.


All berths will be fully operational early Thursday, with laden gate-in tractors back to 9,000 trucks per day. The pickup and drop-off of laden and empty containers will be back to normal, although the requirement of export laden containers only being accepted within seven days of a vessel's arrival will be maintained.


While heavy demand on the trans-Pacific and Asia-Europe trades has been sustained throughout the year, the trades are heading into their traditional peak shipping season that typically runs from July through the third quarter until Golden Week at the beginning of October.


As carriers scramble to resume calls at Yantian, the flood of backlogged export containers being cleared will combine with record US import volume that is expected to continue<https://www.joc.com/maritime-news/container-lines/record-us-imports-through-may-sound-peak-season-alarm_20210615.html> through the third quarter, as well as rising demand from European importers rebuilding inventories to serve their reopening economies.

Shenzhen is China's third-busiest container port and much of this demand from importers in the US and Europe is handled by its terminals. YICT handled the bulk of the 13.3 million TEU in 2020 serving manufacturers in the eastern Pearl River Delta.


The reduced handling capacity of the terminal since late May could have caused as much as 36,400 TEU to stack up every day, according to Lars Jensen, CEO of consultancy Vespucci Maritime and a JOC analyst. He puts the shortfall of containers affected by the congestion at 765,000 TEU, which he believes could take as long as 82 days to be cleared.


"There is a considerable queue of vessels waiting to be serviced - and the queue can be said to be artificially short with the many port omissions both executed and still planned into July from the carriers," Jensen wrote in a LinkedIn post Wednesday<https://www.linkedin.com/feed/update/urn:li:activity:6813337138348789760/>. "Furthermore, there is a huge backlog of cargo to be handled, which essentially is cargo now on top of all the other normal flow of export cargo out of Asia."


A Maersk China spokesperson told JOC.com that based on the Hutchison statement, the backlog will take the next few weeks to clear.

"Yantian is one of the most important gateway hubs globally, and the ripple effect of the partial closure of the port has led to port congestion in nearby ports, such as Nansha, Shekou, and Hong Kong," she said. "To mitigate further impacts, A.P. Moller - Maersk is constantly evaluating the situation and considering contingencies in these ports."


Akhil Nair, Hong Kong-based vice president of carrier management and ocean strategy for SEKO Logistics, said YICT believes it can address the backlog of containers in the actual terminal in a couple of weeks, but that was only a small part of the boxes affected by the congestion.


"The market backlog of export containers waiting at factories will take at least a month to clear," he told a press briefing Wednesday.


John Painter, CEO of Guangzhou Port America, the operator of Nansha on the west bank of the Pearl River, told JOC.com peak season was hitting the container shipping industry "every day" this year.


"The backlog of containers will surely cause a more intense peak season, but I truly believe shippers as well as carriers have learned a valuable lesson - to diversify ports not only at destinations, but at origin ports as well, which helps balance out and protect the supply chain," he said.


Slow return of empties

Thorsten Diephaus, head of strategic accounts at rate benchmarking platform Xeneta, said output from factories in the Pearl River Delta remained unchanged through the Yantian crisis, but the congestion made it difficult to export laden containers and bring empties in.

"Empty boxes are a big issue and export shippers are having to use 20-footers instead of the usual 40-footers," he told JOC.com. "Every ship going back to Asia carries plenty of empties on board, but if they are delayed entering the terminal, the empties cannot get into circulation."


It is a growing problem as the volume of empty containers is immense, with carriers prioritizing the return of empties to China to serve the US import demand.

Peter Sand, chief shipping analyst for shipping association BIMCO, noted in a recent report that the number of empty containers being sent on the backhaul trans-Pacific trade were growing even faster than the already strong growth in loaded imports.


Compared with the first four months of 2019, he noted that the US West Coast has exported 62.5 percent more empty containers in the first four months of this year, with 2.9 million empties being loaded onto ships, the highest ever for the four-month period.


"This is 1.8 times more than the number of loaded containers being exported," he said. "These empty boxes are being returned to Asia as fast as they can, as Asian exporters wait for them to return so that the cycle can start again."


Stefan Holmqvist, managing director of Norman Global Logistics Asia, said in a market update this week the improvement of Yantian productivity was good news, but the backlog would take a long time to clear with both laden containers at the terminal and cargo at factories still waiting for loading. Productivity has also fallen across the South China terminals at Chiwan, Shekou, and Nansha, Holmqvist added.


Yantian's resumption of operations coincided with confirmation that Nansha International Container Terminal (NICT) has imposed a temporary halt on accepting gate-in cargo bookings at its terminal three until Thursday because of excessive demand.


"Nansha Phase 3 Terminal has suspended order handling today to further control the flow and avoid abnormal traffic congestion. It is expected to resume at 14:00 hours tomorrow (June 24)," NICT said in a statement Wednesday.


Container volumes at Nansha have soared as container lines, including CMA CGM and Ocean Network Express, diverted some sailings to Nansha from Yantian.


"The general traffic conditions to Nansha are terrible due to huge demand from container trucks," the head of one Hong Kong-headquartered freight forwarder told JOC.com.


The disruption faced by YICT led CMA CGM to announce Wednesday a further four sailings that would omit Yantian on Asia-Europe and Mediterranean services. The carrier said Nansha and Shekou were the alternative load ports on two of the sailings involving the vessels CMA CGM Jacques Saade and CMA CGM Bougainville.

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