BME Survey on the Shutdown of Yantian Port in China

The COVID-19 related closure of the southern Chinese trading port of Yantian in May has serious implications for global supply chains and goods flows. The disruptions are even greater than during the shipwreck in the Suez Canal at the end of March. The partial closure of Yantian has affected more containers than the blockade in the Egyptian shipping canal.

(Eschborn) This is one of the central findings of a recent BME survey among 166 German companies, of which 104 are directly active in China. “At the beginning of our survey, which started at the end of June, the port of Yantian was not yet fully operational again,” said BME Chairwoman Gundula Ullah on Wednesday in Eschborn. The local administration had imposed quarantine measures and COVID-19 related operational shutdowns starting May 21. Since then, part of the berths and cranes have been unavailable for about a month. At times, a backlog of over 130 container ships formed in the harbor waters. “In the meantime, only about 40 percent of the usual container volume was shipped through Yantian,” informed Ms. Ullah.

Especially for the technology and electronics industry, the delays and disruptions that occurred during container loading are a problem: Normally, about 90 percent of all electronics exports from the People’s Republic pass through the port of Yantian. The city accounts for about ten percent of China’s exports. With goods deliveries worth over 700 billion US dollars, Guangdong province is by far the strongest exporting region in the country.

Global Supply Chains Severely Affected

Since only the ports in Shanghai, Ningbo, and Singapore handle more containers per year than Yantian, the delays that have now occurred could severely impact global supply chains and supplier structures. However, the southern Chinese port – which connects the industrial metropolis of Shenzhen with the outside world – fully resumed its loading activities at the beginning of July.

The Yantian International Container Terminal (YICT) processes – almost like before the outbreak of the COVID-19 crisis – around 40,000 TEU containers per day and is thus operating near full capacity. “However, the companies we surveyed expect that even the full resumption of port operations will lead to long-term disruptions. The expected multi-week disruptions are likely to continue until logistics functions smoothly again,” emphasized Riccardo Kurto, BME’s China representative.

German Companies Surveyed in China

The 104 German companies in China surveyed by BME also show themselves to be affected, but not to the same extent as the 62 companies based in the Federal Republic. However, they also expect that the partial closure of the port will negatively affect internal workflows in the medium term.

According to Kurto, the nearly four-week disruption of loading operations at Yantian could also mean a downward spiral for neighboring ports. This would particularly affect the ports in Nansha and Shekhou in nearby Guangzhou. However, the BME office in China points out that both mentioned ports are currently operating at full capacity at their capacity limits.

The BME survey also provided answers to the specific impacts of the situation in Yantian on the business activities of German companies. Nearly 30 percent fear a continued container shortage and 57 percent expect higher freight and logistics costs. Almost two-thirds of the surveyed German companies anticipate capacity bottlenecks in freight. Rescheduling freight routes is a topic for 50 percent. 29 percent and 50 percent of respondents expect production bottlenecks and delayed deliveries to and from China, respectively.

Building Suppliers in Additional Markets

“As we recommended at the beginning of the COVID-19 pandemic, we advise our members to build suitable suppliers in additional markets and regions in the medium and long term. This is the best way to mitigate failure risks or delivery delays,” said Kurto. Some changes can also be initiated in the procurement market in China. The BME office in Shanghai supports its members through the Sino-European Procurement Platform (SEPP) in identifying and establishing new suppliers in Southwest China. This is a cooperative project between BME, Sichuan Province, and the cities of Chengdu and Pujiang.

The BME office in Shanghai can also provide firsthand information and offer German companies local assessments of further developments in the largest economy in Asia. “Especially local contact can be a great advantage in dynamic developments like those currently in China,” Kurto added in conclusion.

Photo: © Loginfo24; Adobe Stock / Image Caption: Yantian Port Free Trade Zone, Shenzhen City is a hub of global supply chains