China port chaos pressures Kenya’s import prices

Economy

China port chaos pressures Kenya’s import prices


COAST-SHIPPING

Singapore flagged vessel Mv NYK Clara docks at the Port of Mombasa. FILE PHOTO | NMG

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Summary

  • Meishan terminal at Ningbo port resumed operations Wednesday after shutting down due to a Covid-19 infection case.
  • But the impact of the closure of the gateway has worsened logjams in the global supply chains amid a resurgence of consumer spending and a shortage of container vessels.

Congestion at Chinese ports due to a two-week partial closure of the world’s third-largest container port has triggered anxiety over fresh increases in the cost of goods imported into Kenya.

Meishan terminal at Ningbo port resumed operations Wednesday after shutting down due to a Covid-19 infection case.

But the impact of the closure of the gateway has worsened logjams in the global supply chains amid a resurgence of consumer spending and a shortage of container vessels.

Meishan terminal accounts for about a fifth of traffic at the Ningbo port, one of China’s top two container ports.

The situation has already forced many traders in the global supply chain to source goods from alternative costlier markets.

The Kenya Association of Manufacturers (KAM) said Wednesday it was monitoring the situation and may urge its members to turn to other markets for raw material if the situation persisted.

“The association is constantly monitoring global trends on logistics matters, including possible delays and disruptions that may occur due to the sudden surge of Covid-19 cases and consequent measures to mitigate its spread,” the lobby said in e-mailed responses to Business Daily.

Kenya imports a wide range of raw materials and finished consumer goods from China, with electronics such as mobile phones topping shipment orders.

Others are clothing, kitchenware, furniture, machinery, optical and medical equipment. Several Chinese ports are facing congestion as vessels due to call at Ningbo are being diverted and cargo processing is slowed down partly as a result of stricter disinfection measures under China’s “zero-tolerance” coronavirus policy.

The situation has already forced many traders in the global supply chain to source goods from alternative costlier markets.

“The pandemic has revealed the risks of overreliance on imports, including raw materials.

To this end, local industries are also trying to create sustainable backward linkages in the country and regional levels, to supplement the shortage that may arise out of global logistics network,” KAM also said.

China has cemented its position as the largest source market for Kenya’s imports, followed by India and the United Arab Emirates. Official data shows that Kenya’s imports from China stood at Sh208.9 billion in the six months to June, representing a 32 percent rise from Sh157.87 billion recorded in a similar period of 2020. Disruptions in Chinese ports have negatively impacted traders in Kenya this year, with consumers bearing the brunt of costlier goods.

In April, Kenyan importers were slapped with a further 20 percent rise in freight charges following a shortage of shipping containers in China.

The average shipment charges on a 40-foot container from China, for example, breached the Sh646,000-mark in April, up from about Sh430,800 the previous month as traders scrambled for the few available containers. That pushed up freight charges by 95 percent between December and April alone.

Analysts say China’s “zero tolerance” approach to Covid could exacerbate already stressed supply chains this year. Some warn that this may not be the last closure at a port as long as Beijing continues to take this stance.

The shipping industry has been plagued by disruptions this year that have created delays in global supply chains and driven freight rates to record highs. Incidents have ranged from a mega-ship stuck in the Suez Canal in March to virus outbreaks in Southeast Asia to China reducing activity at ports.

In June, Covid infections triggered disruptions at shipping hubs in Southern China, including the key Shenzhen and Guangzhou ports — the first time that the country suspended operations at ports due to Covid cases.

Reuters yesterday reported that Some 68 container vessels were queuing off Ningbo port on Friday, the most in at least three years, despite efforts to divert cargo elsewhere.

The number had fallen to 44 on Wednesday, Refinitiv data showed, but was still above average levels of less than 20 in 2020 and 2019.


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