China, the ‘factory of the world’, is losing its manufacturing dominance. | So Good News

China is losing more manufacturing and export market share to its Asian neighbors, with recent “Zero Covid” policies further eroding its long-held dominance of global trade.

According to data shared with CNBC by transportation business MDS Transmodal, China’s apparel and accessories; shoes Losses were made in key consumer categories, including furniture and travel goods, while exports from mineral products to office technology saw a declining share.

“China’s Zero Covid approach is affecting production and manufacturers are looking for alternatives to the current ‘global factory’,” said Antonella Teodoro, Senior Consultant at MDS Transmodal.

“Digging into the individual product groups exported from China, we noticed that China is losing market share, along with Vietnam, among important countries on the international scene,” Teodoro said.

This view coincides with recent market research on profitability, particularly from Vietnam.

Teodoro said Vietnam’s close proximity to China and cheap labor are the reason why Vietnam is considered a suitable alternative.

Ocean carrier MSC together with Vietnam Maritime Corporation announced in July the creation of a new transshipment terminal project near Ho Chi Minh City. Once completed, this terminal will be the largest in the country. Both Maersk and CMA CGM are investing in expanding their own facilities in the area.

“Ship lines are looking for new markets and investing and expanding into new markets,” Teodoro said. “They perceive the demand and are creating a market with these investments.”

In the pre-Covid years, the competition was fierce. Vietnam has taken the lion’s share of manufacturing trade, increasing long-distance trade by nearly 360 percent since 2014, the year China invested in its maritime and manufacturing sectors.

According to MDS Transmodal, Malaysia and Bangladesh took apparel away from China, while Taiwan saw a slight uptick in metal production.

Since the imposition of US trade tariffs in 2018, China has been looking for alternative sources of supply, initially limited to fashion and footwear, said Akhil Nair, SEKO Logistics’ senior vice president of products for Asia Pacific. The combined effect of the Covid lockdowns in China (Shenzhen, Ningbo, etc.) and disruptions in supply chains has caused what Nair calls “customers to rapidly expand their sourcing geography, particularly for countries like Vietnam and hedged customers.”

Nair said SEKO has seen an increase in intra-Asia trade on the back of raw material flows and rising exports of finished goods from Vietnam and other Southeast Asian countries.

“It is clear that the recent Chinese lockdowns have not affected ship operations or the port, but in some cases are still impacting other highly dependent parts of the supply chain such as trucking, CFS warehousing and container berthing,” Nair said.

Data from freight tracking firm Project44 shows that total vessel TEU (container) capacity leaving Chinese ports has fallen since the start of pandemic lockdowns at the start of 2021.

Monthly shipping capacity of around 11.2 million TEU before 2021 fell to 8.6 million TEU leaving Chinese ports in September, a 23.2% decline, according to Josh Brazil, vice president of supply chain insights for Project44.

According to ocean bookings tracked by FreightWaves SONAR, shippers continue to see a decline in orders for container transportation.

For cargo arriving in the U.S. from China in November, freight managers told CNBC that a 40% to 50% drop is expected.

“A combination of excess inventory combined with reduced demand continues to weigh on Pacific import volumes,” said Alan Baer, ​​CEO of OL USA. “Vessel operators have increased the number of empty yachts that can pull about 30,000 TEU per week of USWC space, and have suspended several mooring lines.”

Ningbo Port, the world’s largest port and third largest container port, is the latest Chinese trade hub to see an impact from the government’s “Zero Covid” policies. A case of Covid-19 was detected on Thursday last week and has spread to Beilun, the busiest port area for the port of Ningbo, causing a drop in productivity, according to global maritime analytics provider MarineTraffic.

On Monday, Alex Charvalias, who reported that MarineTraffic had “decreased container arrivals at the port of Ningbo”, tracked transit through the supply chain and attributed this to the latest Covid outbreak in the area. “Although the MarineTraffic data suggests that the number of vessels arriving in the following days is higher than the previous days, we can still see an improvement in waiting TEU capacity from port restrictions over the last few days,” he said. .

These delays also show up in the latest CNBC supply chain heat map.

“Since many warehouses and container yards are located in Beilun, Beilun District Management has been temporarily closed since October 16,” said Joe Monaghan, CEO and CEO of Worldwide Logistics Group. “Many Ningbo warehouses cannot open to receive cargo, empty containers cannot be picked up from container yards, and truckers need to apply for a special permit to deliver to the Ningbo dock area. The situation in Ningbo may take a week. .”

CNBC Supply Chain Heat Map Data providers include artificial intelligence and predictive analytics company Everstream Analytics; Freightos, creator of the Freightos Baltic Dry Index; Logistics provider OL USA; supply chain intelligence platform FreightWaves; supply chain platform Blume Global; Third-party logistics service provider Orient Star Group; A global maritime analytics provider Maritime traffic; marine visibility data company Project44; Maritime transport data company MDS Transmodal UK; Ocean and air freight rate benchmarking and market analysis platform Xeneta; Sea-Intelligence ApS leading provider of research and analysis; Crane Worldwide Logistics; DHL Global Forwarding; Freight services provider Seko Logistics; and Planet, global Provides daily satellite imagery and geospatial solutions.