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With Beijing reporting only sporadic domestic transmission of
the coronavirus since March, workers have been allowed to return
to posts, factories are restarting and ports are rushing to
clear a backlog of cargoes.
But with virus outbreaks now overwhelming healthcare systems and
shutting logistics channels in other major economies, exporters
and industry analysts warn that global demand for products made
and shipped out of China looks set to plunge.
"We expect the near-term impact on trade growth in coming
quarters likely to be the worst ever, as economies stall and
external demand faces imminent collapse on large scale
quarantine measures across major economies," said Rahul Kappor,
vice president at IHS Markit.
China's container processing volumes fell 10.6% in the first two
months of 2020 compared to the year before, while exports
dropped 17.2%.
And while volumes rebounded in March as manufacturing and
logistics operations rebooted, exporters fear that outbound
shipments may be in for an even steeper slump in the months
ahead.
"There is widespread concern among ports and shipping companies
that the coronavirus overseas will hamper demand and in return
take a toll on production in China," said secretary general at
China Ports & Harbours Association Ding Li.
The export slump could drag on throughout 2020, said Julian
Evans-Pritchard, senior China Economist at Capital Economics,
estimating China's second-quarter exports could contract as much
as 30% year-on-year.
EXPORT ORDERS TO PLUMMET
Some closely-tracked cargo metrics are already showing the
impact of slowing demand in key centers.
Container vessel utilization rates from Shanghai to north
America and Europe were at 85% last week, down by 10 percentage
points from a week earlier, data tracked by Shanghai Shipping
Exchange showed.
Freight rates also dipped, with European routes down 3.1% weekly
as of March 27 to $764 per twenty foot equivalent unit (TEU),
and routes to the U.S. West Coast down 2.2% at $1,515 per TEU.
Ding added it may take time for cargo-handling data to show the
full extent of the global demand contraction as many ports are
still clearing backlogs.
Daily container handling volumes at China's biggest port in
Shanghai last week hit 110,000 TEU, about 90% of pre-virus
levels, and other ports are also trying to rush through
shipments to overseas clients before more stringent movement
restrictions kick in.
"It's even more nerve-wracking now than in February when we had
orders but were not able to complete them. (Now) I don't have
plans or orders at all for April," said a steel exporter.
That demand outlook uncertainty is also weighing on material
markets, with the price of manufacturing-grade hot-rolled coil
steel <SHHCcv1> - used in automobiles and appliances - falling
to four-month lows this week.
Textile and clothing manufacturers are also feeling the effects
of a drop in international demand.
"Many exporters were notified by clients of order cancellations
for the next two months ... leading to increasing pressure on
upstream firms' supply chain," said a statement from the China
National Textile and Apparel Council (CNTAC) last week.
A CNTAC survey showed that 37% of 242 companies reported export
order cancellations last week, while the number of firms
reporting export orders at less than 50% of pre-virus levels
rose by 11.4 percentage points to 26.4%.
China's port association expects container handling volumes in
China to fall 5% to 10% in the second quarter from a year ago,
while imports of industrial materials such as coal and ores are
also expected to slow alongside falling domestic production.
"Our solo goal for this year is to keep the operation alive ...
and only hope that exports order will resume after July," said a
Shandong-based exporter of agriculture products.
(Reporting by Muyu Xu and Shivani Singh; Additional reporting by
Stella Qiu; editing by Gavin Maguire and Richard Pullin)
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