Reliability, resilience and security of production locations and supply chains have become more important due to the pandemic and concurrent geopolitical tensions.
Analysis of Lloyd’s List Intelligence port call data reveals evidence that the fallout from Covid-19 coupled with tensions between the US and China are driving changes that could be part of a longer-term evolution in global trade.
Data for shipping traffic between global container ports in 2021-2022 show predictable trends but also interesting and unexpected developments such as:
Direct China-US trade
The number of direct port calls into the US from China decreased sharply by 17% in 2022 compared to 2021.
After the Covid-led shopping frenzy among US consumers peaked in 2021, demand waned as lockdown measures eased, while at the same time inflation began to surge, leading to a predictable slowdown in transpacific trade year-on-year.
On the supply side, China was able to keep its factories open for longer than many other manufacturing rivals in 2021. But the emergence of the Omnicron variant with resulting strict lockdowns and other measures wiped out this advantage.
By 2022, other countries, notably Vietnam, had begun to choose to coexist with the virus and had their factories back in operation, while China battled multiple outbreaks.
This disruption led buyers, particularly in the US, to rethink their reliance on China as an exporter and prioritise reliability, resilience and security in their supply chains.
This may partly explain why direct port calls from China to Vietnam increased by 23% in 2022, which is indicative of Vietnam’s growing exports to the West.
The number of direct calls from Vietnam to the US also jumped by 41% from 44 to 62, mainly driven by smaller ships of less than 4,000 teu, according to our data.
But this trend appears at least in part to be due to goods of Chinese origin being relabelled 'Made in Vietnam' to enable exporters to sidestep punitive US tariffs.
Most of Vietnam’s exports to North America still have to be transhipped via Hong Kong, Singapore, Kaohsiung or other ports, so it remains to be seen if this trend will last.
Investment in Mexico
Elsewhere, Mexico offers another intriguing example of a beneficiary from the escalating China-US geopolitical rivalry, which extends from issues such as the computer chip industry and 5G-related technologies to the former’s relationship with Russia.
It is no coincidence that the port of Lázaro Cárdenas in Mexico saw a 20.5% increase in its 2022 throughput and returned to the Lloyd’s List Top 100 Ports list.
Mexico is also now seen as a crucial path for ‘Made in China’ products to bypass tariffs and sanctions to penetrate the US market, driven by a nearshoring strategy and free trade accords.
Foreign direct investment in Mexico from China has provided an important thread to this emerging trend. This investment is focused on industries and locations that mainly export to the US and seems to be related to the relatively higher tariffs imposed on Chinese imports.
Relations with Russia
Meanwhile, Russia represents one of the very few positive recent developments over the past year for Chinese manufacturers that have been struggling to get direct access to foreign consumers.
China exported goods worth $76.1bn to Russia in 2022, up 12.8% compared to 2021, before the war with Ukraine started.
Our data indicates that the number of China-Russia direct port calls surged to 342, up 88% over the same period in 2021.
The results were mostly backed by ships sailing into Far East ports, such as Vladivostok and Vostochnyy.
Vladivostok was given access to China’s domestic transhipment trade in May 2023.
Since June, Beijing has allowed domestic-trading cargo from Jilin province — a key agricultural and industrial region in the country’s northeast — to transit through the Russian port before reaching large Chinese cities, such as Shanghai and Ningbo, in the south.
Derisking supply chains
China has a well established supply network with deep capabilities and while its global share may gradually diminish over time there is no rush from businesses in the West to completely recalibrate their existing supply chains.
China has seven of the world’s Top 10 container ports based on throughput, according to the latest annual rankings by Lloyd’s List, and it is unlikely that this dominance will change any time soon.
The term ‘reglobalisation’ has been used to describe the current reconfiguration of the world economy and trade patterns, as the West increasingly realises that a full-scale decoupling from China is not feasible — but a derisking is imperative.
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