Africa-China trade slowed by container shortage as Covid-19 hits shipping

China is Africa’s largest trading partner, exporting products such as garments, electronics and construction equipment to many countries on the continent, but traders are facing cargo delays and steep import costs during the Covid-19 pandemic.

Observers blame this on an acute shortage of shipping containers, with more vessels prioritising China-Europe and trans-Pacific trade routes before serving other markets including Africa. Importers from East Africa say their orders are subject to delays of weeks or months.

Gilbert Langat, chief executive officer of the Shippers Council of Eastern Africa, which advocates for cargo owners, said countries in Sub-Saharan Africa had been the most affected.

According to Langat, cargo to Africa was left short of containers by the disruption of the pandemic, then exploding demand from Asia-Europe and trans-Pacific trade routes as economies reopened, and the backlog caused by this year’s Suez Canal blockage.

“With the reduced availability of containers because of the balance of trade favouring Europe, the Americas and the Arab subcontinent, our freight rates have tripled because of high demand,” he said.

The border restrictions China imposed to curb the spread of Covid-19 prompted Evergreen and Cosco, the major shipping lines taking cargo to East Africa, to stop sailing there, and businesses to look to alternative markets, Langat said. China-Africa trade has yet to fully recover.

Samuel Karanja, chief executive of the Importers and Small Traders Association of Kenya, said trade between China and Kenya had yet to return to pre-coronavirus levels, because of cargo delays. “We are receiving cargo but not at levels seen before [the pandemic],” Karanja said.

Rwanda, a landlocked country that imposed border restrictions during the pandemic, faces a shortage of some products because of import delays from China. The Rwanda Chamber of Commerce has encouraged traders to diversify their source markets to include Turkey, India, Dubai and Egypt.

Joseph Akumuntu, head of commerce at Rwanda’s Private Sector Federation, told Rwandan media that importers were “suffering because they can’t access China” and shipping costs had risen sharply.

Jonathan Roach, container market analyst at London-based Braemar ACM Shipbroking, said the freight cost increases applied across the board, but most of all to Asia-Europe and trans-Pacific eastbound routes, which carry the biggest volumes.

Freight costs have risen sevenfold for Asia-Europe and are 13 times higher for trans-Pacific eastbound routes, against a fourfold increase for Asia-Africa westbound routes, Roach said. Moving empty containers to where they were needed also became difficult in the early stages of the pandemic, Roach said.

“Repositioning of empty container equipment was out of sync and ports quickly ran short as demand picked up,” he said. “We estimate that [volume of cargo] has increased by about 13 to 15 per cent year on year in the first half of 2021, and by about 6.5 per cent compared with the first half of 2019, which gives a better picture because the demand shock in early 2020 skewed annual figures.”

He said he expected supply chain productivity to return to pre-pandemic levels in 2022, and freight rates to normalise.

James Baker, containers editor at Lloyd’s List, said demand during the post-coronavirus recovery was so high on the trans-Pacific routes that the freight rates the container lines could earn there were the highest, so they were prioritising that more lucrative trade and supplying containers there.

“This then means shortages of containers for other trade, such as to Africa, which again reduces supply and pushes up rates,” he said.

Peter Sand, chief shipping analyst at the Baltic and International Maritime Council, a Copenhagen-based association representing shipowners, also said that the drop and subsequent steep rise in demand was behind the shortage of containers for exports out of manufacturing hubs in Asia, particularly China.

This prompted freight rates to rise as American consumers bought imported goods – 30 per cent more in the first half of 2021 than at the height of the pandemic disruption, Sand said.

“The rise in rates has since spread to trade lanes across the globe, because they all lack containers,” he said. “To some extent, carriers have also shifted capacity towards the trans-Pacific from less busy trade lanes.”

For now, that has left some importers, especially in many African countries, further back in the queue.

“We expect the next normal to arrive as late as the end of 2022,” Sand said. “The current clogged-up situation will simply take a long time to unwind.”

Source: SCMP