There is a major backlog of shipping vessels piling up off the coast of Shanghai, and the global effects of this will soon be seen.
Because of another Wuhan coronavirus (Covid-19) lockdown, hundreds or even thousands of shipping vessels are floating around in the waters next to China.
Whatever their containers contain is not getting into or out of the country, in other words. And seeing as how much of the world relies on goods made in China, the impact of this come summer will be disastrous.
“The Chinese Communist Party is about to wreck your summer,” tweeted Craig Fuller, founder and CEO of FreightWaves and American Shipper, along with a graph showing that the coming volume drop in ocean container volumes (TEUs) leaving China for U.S. ports “is staggering.”
“Our Ocean TEU Volume Index in SONAR now has a 14-day forward look at volumes, and it looks ugly,” explained FreightWaves author Henry Byers. “By early May 2022, we could see the lowest levels we’ve seen since May of 2020.”
The person who tweeted about the CCP ruining everyone’s summer added that when (or if?) China resumes its economy as normal, there will consequently be a surge of containers from China, “but no one knows when this will happen, how long it will take, and how backed up their domestic supply chains are,” Fuller says.
“For now, we know the freight market is slowing and [China] is only making things worse,” he went on to write in another tweet.
Fuller warns that there has already been a 7 percent drop in trucking shipping rates this past week, which would point to deflation in some sectors. Food and other consumer goods, however, are still seeing massive inflation.
“A large private consumer kitchenware manufacturer told me that they have seen a large contraction in demand over the past 8 weeks,” Fuller added in another tweet about the situation.
When asked how this ties into falling demand and record inventories, Fuller responded that “it could allow inventories to burn off, but the biggest question is what those inventories consist of and how long will Chinese manufacturing be shut down.”
“Too many questions at this point,” he added.
It remains a mystery as to why China is bucking the trend of the rest of the world by imposing more lockdowns and restrictions when everyone else has opened back up. Is China trying to destroy the global economy?”
“Is the slowdown in Shanghai at all welcome?” asks Mish at Mish Talk.
“To the extent U.S. merchants have ordered too much inventory in the face of falling demand, perhaps … But Fuller notes there are just too many questions. For starters, what is China doing? Every other country on the planet is loosening restrictions … What’s really going on?”
In the United Kingdom, retail sales have fallen 1.4 percent amid rising inflation. In the United States, truckload contract load volume plummeted by 4.5 percent this past week, representing the seventh consecutive week of declines in this sector.
Bank of America’s Weekly Shipper Survey charts further suggest that deflation is soon on the way. That survey states that freight is nearing “recession level,” which could be pointing to an impending crash.
Keep in mind that when Fuller uses terms like recession or inflation, he is referring specifically to the trucking industry. This is not an overall assessment of the economy as a whole.
“A very hard landing is on the way,” Mish says about the situation.
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