Persn Using Machinery

Manufacturing Orders from China Down 40%, Delays Expected

U.S logistics managers are bracing for delays in the delivery of goods from China in early January as a result of canceled sailings of container ships and rollovers of exports by ocean carriers.

Carriers have been executing on an active capacity management strategy by announcing more blank sailings and suspending services to balance supply with demand.

U.S. manufacturing orders in China are down 40 percent, according to the latest CNBC Supply Chain Heat Map data. As a result of the decrease in orders, a U.S based freight forwarder says they are expecting Chinese factories to shut down two weeks earlier than usual for the Chinese Lunar New Year — Chinese New Year’s Eve falls on Jan. 21 next year. The seven days after the holiday are considered a national holiday.

“Many of the manufacturers will be closed in early January for the holiday, which is much earlier than last year,” The forwarder said.

Supply chain research firm Project44 says that after reaching record-breaking levels of trade during the pandemic lockdowns, vessel TEU (twenty-foot equivalent unit) volume from China to the U.S has significantly pulled back since the end of their summer in 2022 — including a decline of 21% in total vessel container volume between August and November.

An Asia-based freight forwarder warned clients about the ocean transport business climate. They stated that there is a combination of declining demands and overcapacity as new tonnage enters the market.

A forwarder based in the U.S said there are some early signs of an inventory correction. Overall business volume and order flow out of Asia continued to be muted as carriers cancel more vessels, and there is little upside momentum leading into Chinese New Year they said.

U.S imports from Asia plunged in October to their lowest level in 20 months and the large West Coast Ports of LA and Long Beach have experienced the largest drop in trade. Supply Chain insights from Project44 show that shippers rerouted some of their shipments to the East Coast to avoid the risk of a major union strike at West Coast Ports.

The Asia-based freight forwarder expects most carriers to extend their West Coast rates until December 14, however, U.S East Coast rates are expected to drop in the first half of December.

The recent rise in Covid lockdowns in China continues to impact manufacturing operations and delay cargo outputs. There are also local access obstacles for cross-province and cross-city transportation, mostly related to truck driver testing requirements, with trucking capacity to be largely affected.

Blank (cancelled) sailings data shows the cut in vessel capacity on the transpacific route (China to the U.S.) continues at a significant pace. Maersk and MSC has suspended almost half of its U.S. West Coast services for December. CMA CGM, Cosco Shipping, OOCL, Evergreen, Ocean Network Express, Hapag-Lloyd, HMM and Yang Ming Line have cut overall vessel capacity by 40-50% up to Chinese New Year.

As a result, space for shippers is considered tight for cargo bound for the Pacific Southwest route and service reliability has declined, with carriers including MSC and Hapag-Lloyd rolling (not accepting) cargo on sailings in an effort to make up time. According to logistics managers, this is creating two weeks of delay. MSC said in its latest notice to clients, “ETAs are indicative and subject to change without prior notice.”