1 of 1 Container ship in the port of Shanghai, eastern China, in a photo taken in April 2022 Photo: Chen Jianli/Xinhua via AP Container ship in the port of Shanghai, eastern China, in a photo taken in April 2022 Photo: Chen Jianli/Xinhua via AP
After years of health restrictions due to Covid19, the Red Sea crisis is the final straw for China, worrying exporters on the country's east coast. In addition to delivery delays, they are faced with rising prices.
“There are two main impacts of this crisis,” explains Marco Castelli, founder of IC Trade, based in Yiwu in the southeast of the country, which exports Chinesemade mechanical parts to Europe.
- “The first is the extension of shipping times. The running times are longer. It will take about 20 to 25 days longer than usual. “That then becomes a liquidity and inventory problem for customers and suppliers,” he says.
- “And the second impact is the rising transport prices.”, explained. Depending on the urgency of the delivery, the container costs would have tripled or even quadrupled, says the expert. Some importers have already canceled some of their orders.
“It's still better than during the virus. “There are ups and downs in business, we try to adapt,” explains the agent, who works with many clients in Europe and Africa.
“But I hope it doesn’t last that long. Shipping is very expensive at the moment. We went from 2,000 to 6,000 euros per container to France. So if you don't run out, you say you'll wait for the next Chinese holiday month, hoping that prices will go down again,” he laments.
“I have a Moroccan customer who told me that he still had stock and would wait until after Chinese New Year to deliver because shipping is very expensive at the moment. But customers who really need their products have no choice. For retailers, businesses have to work and the end customer pays the price,” he says.
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Inflation puts a strain on consumers, but can also slow down the entire production chain. In the long term, there is a risk that some customers will relocate their production, which in turn has two logistical consequences, estimates Marco Castelli.
“The first reason is that you have longer delivery and transit times and need to order more products to maintain your inventory. So if you need more time, you need more goods in your warehouse because the next inventory will arrive later,” he explains.
“So you have to spend money and at some point think about moving your orders. But the change is not that easy and, above all, not quick. The first consequence is that the company has to buy more products and that leads to liquidity problems,” he adds.
For some factories in China, trade with Europe and Africa accounts for up to 40% of global activity. The crisis in the Red Sea could therefore also weigh on employment. This explains Beijing's concerns.
“The waters of the Red Sea represent an important international trade route for goods and energy,” Chinese Foreign Ministry spokesman Mao Ning said on Friday.
There is urgency because the New Year holidays begin in less than three weeks, when around 300 million migrant workers go on vacation and factories close.