China’s COVID lockdowns add to shipping backlog. What does this mean for Australia?

The global shipping backlog threatens to turn into a years-long saga as new lockdowns in China slow trade at some of the world’s biggest ports.

Shanghai, China’s largest city and the world’s busiest container port, is in full lockdown as authorities deal with a new wave of COVID-19.

Off the coast, an increasing number of freighters are waiting idle to land and unload.

Paul Zalai, director of the Freight and Trade Alliance and secretariat of the Australian Peak Shippers Association, said trade had already been buoyed before China’s lockdown.

“We still have major congestion in ports around the world…China is one, but also still off the United States there are several container ships stuck off Los Angeles,” Mr Zalai said. .

“We saw it when [the Ever Given] blocked the Suez Canal last year, [but] that stuff fades into insignificance with the issues we see now.”

Yangshan Port in Shanghai is one of many around the world facing a backlog of shipping containers.(Reuters: Aly Song)

“We are lucky…they always serve us”

Australia’s relative size and lack of inland shipping has put the country squarely in the line of fire.

Mr Zalai said Australia had yet to feel the potential impact.

“Honestly we are lucky they are still serving us, every container shipping company serving Australia is foreign owned,” he said.

White man to left of frame speaking into microphone
Paul Zalai says Australia is lucky that containers are still collected for transport.(Provided by: Paul Zalai)

“These are business entities, they seek to get the maximum return from their assets.

“Shipping companies have actually been winners of all of this, after years of really struggling, they are really making up for lost time now and bringing in multi-billion dollar profits.”

He said that as backlogs mount, companies will have to start making tough business decisions.

“Shipping companies don’t want their ships sitting idle, that’s not helping anyone, so we’re seeing them adapt by running.

“The other problem, of course, is that trade is a two-way street, so our regional exporters will feel the pinch as well.”

Australian wool exports hit

Shanghai is not only an epicenter of world trade, it is also one of the most important ports in the world for the Australian wool trade.

Chairman of the Australian Wool Exporters and Processors Council, Josh Lamb, said the problem was not just wool getting stuck on ships.

Wool is sitting on a table
Premium Australian wool is washed up on shipping vessels off the coast of China.(ABC New England North West: Lara Webster)

“Any wool that goes to China when it’s shipped from Australia is paid for when it leaves. So if it’s stuck on a ship outside of Shanghai, it’s actually not our problem,” Ms. Lamb.

“What that does is it affects the mills that we sell our wool to, it affects their cash flow, so we won’t be able to do any new business with those customers until the wool gets there.”

He said the industry had already faced “logistical challenges” and believed “some relief” would arrive in 2023 before the latest setback.

“We are now starting to hear that it could be 2024 [until that relief]“said Mr. Lamb.

“We expect issues later in Australia where ships will have to skip Australia just to catch up, and we could be collateral damage in that scenario.”