Chinese container logistics firms mull work suspension as losses rise
Published: Jun 02, 2021 08:49 PM
Containers on CMA CGM Marco Polo container ship are seen as it travels in the New York Harbor, the United States, on May 20, 2021.(Photo:Xinhua)

Containers on CMA CGM Marco Polo container ship are seen as it travels in the New York Harbor, the United States, on May 20, 2021.(Photo:Xinhua)

Some container logistics companies in East China's Fujian Province said that they plan to suspend operations on Thursday as their profits decline amid container shortages, higher costs and logistic disruptions due to the COVID-19 pandemic, even though demand remains resilient.

Chinese officials and industry leaders are moving swiftly to address those woes, insiders said. But such a plan underscored the severe impact of the COVID-19 pandemic on many industries in the complex global supply chain, where big firms are seeing rising profits but smaller businesses are seeing falling revenues. 

Rising fuel prices, higher drivers' wages and soaring management costs, as well as higher prices for spare parts and tires, are all more than container freight businesses can sustain, the local logistics industry association in Shishi, Fujian said in a notice, adding that all freight businesses in the region will be suspended on Thursday.

A director with the association surnamed Li confirmed the latest notice when reached by the Global Times on Wednesday.

"The shipping companies, the government and the port are all actively dealing with the matter," said Li. He declined to provide more details.

A person with a local logistics company said on condition of anonymity that there had been a plan for business suspension on Thursday, but that has since been revoked.

But he also expressed concerns. "Freight rates haven't changed much in the last two years, nor have towing fees." 

This isn't the first time for the logistics association to send such a notice, industry news website reported that a similar notice was sent in early May, which did not produce any results.

Experts said that freight rates have been rising continuously, putting great pressure on the upstream and downstream of the industry since late last year.

"This is a very common phenomenon not only in China but also overseas. It's hurting freight companies' liquidity and profits," Wu Minghua, an independent shipping industry analyst from Shanghai, told the Global Times on Wednesday.

Government agencies and industry associations have sought to rein in freight rates, but because of the impact of the COVID-19 epidemic, the problem continues, the expert said.

Logistics enterprises are more dispersed and thus in a weak position to bargain with large international shipping companies, said Wu, and they also face fierce market competition despite the strong global demand for logistics.

It's a different story for companies like Maersk. In the first quarter of 2021, the shipping line's revenue reached $12.4 billion, up 30 percent year-on-year, according to its financial filings.

Wu predicted that the pressure will persist because the peak shipping season - normally from May to September, when Christmas orders are filled in Europe and the US - has just begun.