Advertisement

China lockdowns, Ukraine invasion delay imports to regional ports

Tuesday May 10 2022
Container terminal.

The almost empty container terminal within Mombasa port as cargo arrival declined due to Covid-19 and competition from Dar-es-Salaam port in Tanzania in this picture taken in September 2020. PHOTO | FILE | NMG

By ANTHONY KITIMO

East African countries are set to suffer more importation delays following new Covid-19 cases in China and the Russian invasion of Ukraine increased congestion in the supply chains.

Already, authorities in Beijing have imposed lockdowns in regions reporting infections, restricting workers to port yards. At the same time, the region, which imports more than half of its wheat from Ukraine, must now accept delays as the war disrupts routine transportation.

Shippers have already raised concern over expected delays in the supply of key goods, saying the number of ships docking at the ports of Mombasa and Dar es Salaam is expected to reduce in the next few weeks.

Kenya Ship Agents Association chairman Silvester Kututa said Covid-19 restrictions imposed three weeks ago at Shanghai port in China have left factories temporarily shut down, leaving warehouses idle and slowing truck deliveries thereby exacerbating container logjams.

“Reports indicate that nearly one third of goods leaving the port of Shanghai are held up due to a strict Covid-19 lockdown that is threatening freight. As a result, the end of April witnessed more than 23,000 ships rerouted to avoid the Chinese port thus causing shipping delays,” said Mr Kututa.

Mr Kututa said congestion will affect Africa considering the business in the continent contribute a small percentage of global shipments.

Advertisement

Zero-Covid strategy

“As a result of recent Covid lockdowns in China, shipping lines are opting to operate to Europe where there are economies of scale and this will affect shipment of goods in Africa. Also, the increasing non-tariff barriers in East Africa will affect shipments and increase freight costs further,” said KSAA chairman.

Concerns about the economic impact of lockdowns is leading Chinese authorities to introduce measures aimed at facilitating major industrial operations and transport while maintaining their zero-Covid strategy.

Shanghai has been in a strict lockdown since March 28 and it has exacerbated a supply chain crisis that has caused shortages and price rises across the world.

As a result of lockdown, imported containers wait on average for 12.1 days at Shanghai port before they are picked up by truck and delivered to destinations inland, according to supply-chain data provider Project44.

The rate for April 18 was almost triple the 4.6 days on March 28 with trucking shortages have crippled efforts to supply key inputs to factories and transport goods such as autos and electronics to the ships.

China is one of the Africa’s market source of key products with data from World Trade Organisation indicating China-Africa trade reached $185.2 billion between January and September 2021, up 38.2 percent year-on-year.

Shippers have also raised concern that Africa shipment will be exacerbated by Russia’s invasion of Ukraine which will worsen food security crisis in many African countries.

Many countries in East, West, middle, and southern Africa rely on Russia and Ukraine as main suppliers of cheaper wheat, fertiliser, or vegetable oils, but the war has disrupted global commodity markets in general, limiting the flow of goods as Western allies impose sanctions on Russian firms, and travel spaces are restricted.

Palm oil disruption

Last week, Indonesia, the world’s biggest producer of palm oil, the main raw material for cooking oil, soaps and shampoos, banned exportation of the product to meet domestic needs. Indonesia said it was responding to the growing shortage of products including palm oil across the world after the war in Ukraine disrupted supply lines.

These kinds of decisions, shippers say, will cause the already high food prices in the region to skyrocket.

The United Nations Food and Agriculture Organisation’s Food Price Index, a measure of the monthly change in international prices of a basket of food commodities, increased 12.6 percent from February to March.

The March index is the highest it has been since the measure was created in the 1990s.

Russia and Ukraine are among the top five global exporters of barley, sunflowers, and maize, and account for about one-third of the world’s wheat exports.

In an earlier interview, chairperson of Kenya-China Trade James Kariuki cited the lockdown of Shanghai implying that goods from Yiwu, which is a hinterland that supplies a lot of goods such as kitchen ware, bedsheets, towels, toothpicks and some electronics, cannot reach the port for onward shipping to Kenya.

Shanghai’s importance

Mr Kariuki said the current standoff will impact negatively on supplies in the country as it takes at least 45 days to complete the shipping cycle to get goods delivered to the local market.

“Yiwu supplies Kenya with 60 percent of goods that we get from China, however, the current restrictions on Shanghai imply that containers cannot get to the port for onward shipping to Kenya,” said Mr Kariuki.

Shanghai is the world’s number one container port, playing a pivotal role in global trade with most countries in the world relying on China for the supply of key industrial materials and finished goods

Concerns about the economic impact of lockdowns is leading Chinese authorities to introduce measures aimed at facilitating major industrial operations and transport while maintaining their zero-Covid strategy.

Advertisement