Manufacturing orders to China down 40% in unrelenting demand collapse

[Hydrogen]

• U.S. manufacturing orders in China are down 40% in what a logistics manager described to CNBC as an unrelenting demand collapse.
• Asia-based shipping firm HLS recently told clients it is a “very bad time for the shipping industry.”
• China to U.S. container volume was down 21% between August and November.
• Chinese factories are shutting down two weeks earlier than usual ahead of Chinese New Year.

U.S. logistic managers are bracing for delays in the delivery of goods from China in early January as a result of canceled sailings of container ships and rollovers of exports by ocean carriers.

Carriers have been executing on an active capacity management strategy by announcing more blank sailings and suspending services to balance supply with demand. “The unrelenting decline in container freight rates from Asia, caused by a collapse in demand, is compelling ocean carriers to blank more sailings than ever before as vessel utilization hits new lows,” said Joe Monaghan, CEO of Worldwide Logistics Group.

U.S. manufacturing orders in China are down 40 percent, according to the latest CNBC Supply Chain Heat Map data. As a result of the decrease in orders, Worldwide Logistics tells CNBC it is expecting Chinese factories to shut down two weeks earlier than usual for the Chinese Lunar New Year — Chinese New Year’s Eve falls on Jan. 21 next year. The seven days after the holiday are considered a national holiday.

“Many of the manufacturers will be closed in early January for the holiday, which is much earlier than last year,” Monaghan said.

Supply chain research firm Project44 tells CNBC that after reaching record-breaking levels of trade during the pandemic lockdowns, vessel TEU (twenty-foot equivalent unit) volume from China to the U.S. has significantly pulled back since the end of summer 2022 — including a decline of 21% in total vessel container volume between August and November.



Image link:  https://i.ibb.co/TR4BmSv/chinese-imports.jpg

Asia-based global shipping firm HLS warned clients in a recent communication about the ocean transport business climate.

″It seems to be a very bad time for the shipping industry. We have the combination of declining demands and overcapacity as new tonnage enters the market,” it wrote.

HLS analysts are predicting a further 2.5% decline in container volumes and a nearly 5-6% increase in capacity in 2023, which will continue to negatively impact freight rates in 2023.

“The container shipping market will be further complicated by economic uncertainty, geopolitical concerns, and also the increasingly heated market competition,” HLS wrote.

OL USA CEO Alan Baer tells CNBC that there are some early signs of an inventory correction. Overall business volume and order flow out of Asia continue to be muted as carriers cancel more vessels, and there is little upside momentum leading into Chinese New Year. But Baer said, “Space has already tightened, so while demand is soft, space may be at a premium in January and throughout Q1. On the plus side, inventory depletion and the need to restart the order and delivery cycle appears to be inching upward.”

U.S. West Coast ports take biggest hit

HLS cited trade data showing that U.S. imports from Asia plunged in October to their lowest level in 20 months. The spot rate for a container from Asia to the U.S. West Coast has crossed the breakeven point, “with little room for further reductions,” it wrote.

The large West Coast ports of Los Angeles and Long Beach have experienced the largest drop in trade, according to Josh Brazil, vice president of supply chain insights at Project44, as shippers also rerouted some of their shipments to the East Coast to avoid the risk of a major union strike at West Coast ports.

HLS expects most carriers to extend their West Coast rates until December 14, holding at $1,300-$1,400 per forty-foot equivalent containers (FEU). However, U.S. East Coast rates are expected to drop by $200 or $300 to average $3,200-3,300 per FEU in the first half of December.

The recent rise in Covid lockdowns in China continues to impact manufacturing operations and delay cargo outputs. There are also local access obstacles for cross-province and cross-city transportation, mostly related to truck driver testing requirements, with trucking capacity to be largely affected.

The fight for vessel space, the rollovers of cargo, and the slow trucking is tracked by the CNBC Supply Chain Heat Map.

Blank (canceled) sailings data shows the cut in vessel capacity on the transpacific route (China to the U.S.) continues at a significant pace. The 2M Alliance of Maersk and MSC has suspended almost half of its U.S. West Coast services for December. The Ocean Alliance (CMA CGM, Cosco Shipping, OOCL and Evergreen) and THE Alliance (Ocean Network Express, Hapag-Lloyd, HMM and Yang Ming Line) have cut overall vessel capacity by 40-50% up to Chinese New Year.

As a result, space for shippers is considered tight for cargo bound for the Pacific Southwest route and service reliability has declined, with carriers including MSC and Hapag-Lloyd rolling (not accepting) cargo on sailings in an effort to make up time. According to logistics managers, this is creating two weeks of delay. MSC said in its latest notice to clients, “ETAs are indicative and subject to change without prior notice.”

The drop in manufacturing orders from the U.S. and the E.U. is also impacting Vietnam, which has been booming as a manufacturing hub as more trade moved away from China.

Since early this year, 12,500 companies were closed per month, a 24.8% increase year over year, according to the Vietnam General Statistics Office report. The combination of the lack of manufacturing orders and loan interest rates increasing from 6.5% to 13.2% in Vietnam led many companies to close factories instead of signing new order contracts, according to HLS. Canceled ocean sailings bound for Vietnam are up 50% for December.

Surprise European manufacturing increase

Unlike the decrease in orders out of China, trade data analyzed by Project44 indicates that the Europe-to-U.S. route is “one of the possibly most surprising and certainly most significant developments since early 2020,” Brazil said.

“This sharp rise cannot be explained by the pandemic alone. But a strategic shift from over-dependency on trade with China and geopolitical tensions over Russia are the main drivers of the EU-U.S. trade boom,” he said.



Image link:  https://i.ibb.co/1ssfr3B/european-imports.jpg

The global trading map is being rapidly redrawn, with EU-U.S. trade and investment in U.S. rising sharply as economic ties between the West and China are subjected to critical scrutiny. This year, the U.S. has imported more goods from Europe than China – a big shift from the 2010s, according to Project 44.

“For their part, Europe’s manufacturers battling sky-high energy prices and inflation are increasingly exporting to and investing in the U.S.,” Brazil said.

Germany’s exports to the U.S. were almost 50% higher in September year over year. Germany’s mechanical engineering sector has boosted its exports to the U.S. by almost 20% in a year over year comparison of the first nine months of 2022, according to Project 44.

https://www.cnbc.com/2022/12/04/manufacturing-orders-from-china-down-40percent-in-demand-collapse.html

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According to this, the united states has seen a decline of imports arriving on the west coast from china. Accompanied by a simultaneous boost in the arrival of imports from europe on the east coast. This shift in trade routes from west to east however does not do anything to counteract the high decline in shipping volumes.

This reflects a significant decline in the purchasing power of american consumers. As the world's largest consumer market the united states represents a significant portion of global purchasing power. A market which major exporters of the world have catered to. The US consumer market however appears to be drying up as rising fuel and food prices cut into the disposable income of average to even middle class consumers.

While many might have the impression that rising prices affect low bracket earners for the most part. Recent studies have concluded that many middle class and even high income earners also do not have much salary left over after deducting the high price of rent and other monthly fees. So it seems that everyone is tapped out due to cost of rising expenses.

What we have seen so far could only be initial reactions. With bigger shifts coming later on.

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[franky1]

when china usually see a year low of 1.4m and a high of 2.6m
having it at 2.47-1.96 in sept-nov.. is not that drastic.. it just means they are doing the same in winter as as they did in summer

the interesting thing is EU to US has picked up the winter demand away from china

[Zlantann]

According to this, the united states has seen a decline of imports arriving on the west coast from china. Accompanied by a simultaneous boost in the arrival of imports from europe on the east coast. This shift in trade routes from west to east however does not do anything to counteract the high decline in shipping volumes.

United States imports from China might be declining because most critical manufacturing industries have left the Chinese shores to other friendly nations. The number of companies that left China during the tenure of Donald Trump and because of strict Covid-19 restrictions are enough to impact on import statistics. While imports from China is decreasing, India and Vietnam are taking the over the gap. In the third quarter of this year US-India trade increased by 40%. Vietnam's trade with the US have kept growing over the years making the country one of the largest trading partners of the US. It is also a great news to see that European nations are also penetrating the largest consumer market in the world.

[pooya87]

This is part of the ongoing economic war that has been going on for a long time now.
The Big Shuffle part of it is actually interesting to watch. For example China reduces export to US while significantly increases it to elsewhere specially to Russia after they were sanctioned and the West stopped a lot of exports to Russia. On the other hand US is starting to import goods from elsewhere even though I wonder how much EU can replace China specially in this heavily competitive world where production cost (hence product prices) are heavily increasing in EU with expensive labor and energy.

[avikz]

when china usually see a year low of 1.4m and a high of 2.6m
having it at 2.47-1.96 in sept-nov.. is not that drastic.. it just means they are doing the same in winter as as they did in summer

the interesting thing is EU to US has picked up the winter demand away from china

Probably yes, probably not! The world equation is changing drastically along with the economic scenario and also with the cold powerplay between US and China. Apple has already moved out of China and started building their production hub in India as a JV with TATA group. Canon has closed down their factories in China and moved out their production to elsewhere.

I think it's a cumulative effect that China is facing. Also I think it's great for the world economy because China is the biggest threat to world peace after US. While US attacks the oil rich countries, China attacks their neighbours. If global institutions are moving out of China and their exports are declining, that might balance couple of things for the rest of us.

[o48o]

-cut-
This reflects a significant decline in the purchasing power of american consumers
-cut-

Yeah, but it's most likely good for Americans in a long run as the current model of outsourcing everything wasn't sustainable in any way. When they don't outsource jobs and products to get from cheaper countries, they need to produce stuff on their own. Meaning more jobs and more quality products and self sustainability.

And on the plus side no need to bow down at dictatorships because of fear of losing trade deals.
But transition time will be hard for Americans, that's for sure. I guess they just need to "man up" now to put in terms of toxic masculinity.

[Smartprofit]

Currently, the world economic system is collapsing. 

All major countries tend to localize large-scale production in their own territories.  I have a feeling that large countries are preparing for a global civilizational crisis.  This crisis will be accompanied by territorial isolation, wars and the cessation of air traffic between continents. 

In these circumstances, the key factor is the availability of own production of food and electricity. 

It is also important to be able to produce modern microelectronics (in particular, microcircuits), since such production is very important for maintaining the population management system in controlled areas. 

In any case, difficult times lie ahead...

[Husires]

During the past three months, China has suffered from the consequences of Coronavirus pandemic in its most severe form ever. Many cities have been closed, and it is natural for the industry to be affected by these closures, especially as it follows the “zero-COVID” policy that the government is trying to continue with.

you can read China shifts away from ‘zero-COVID’ by announcing more easing measures

Going back to the above chart and taking into account:

• Thousands of jobs are laid off in the United States.
• High cost of debt.
• economic uncertainty.

With what happened at the beginning of the pandemic, we will find that the numbers are more logical than geopolitical concerns or a shift regarding the nature of relations between the two countries.

[sunsilk]

I thought that China will be able to sustain the high that they've experienced since the covid-19 pandemic in terms of many things like manufacturing and production.

But I think with due to some politics, big manufacturing companies that have been outsourcing to China have finally looked for some neighboring and nearby countries that are even cheaper from what they're asking.

Thus, they want to stop supporting the Chinese economy as it seems dominating from the usual that we've seen before.

Well, in sum to this, we're still experiencing too many crises right now. The covid 19 virus is still there, high oil prices, war and policies are affecting not only China but also other countries.

[DrBeer]

It seems that we are witnessing the beginning of the next large-scale crisis on a global scale - the fall of the Chinese economy! China's economy is one of the largest in the world, and the clear leader in Southeast Asia. But I have been saying for a long time that it is export-oriented, and is highly dependent on the US and EU consumption markets. And if the US, in the first place, and the EU in the second place, greatly reduce the consumption of goods from China, this will bring down an already not very stable economy. In addition, the United States plans to reduce the presence of American high technologies in China in the near future - from the withdrawal of enterprises to the United States, to restricting American companies from building any high-tech industries in China ...
Well, another series of the world show!

[stompix]

Surprise European manufacturing increase
Unlike the decrease in orders out of China, trade data analyzed by Project44 indicates that the Europe-to-U.S. route is “one of the possibly most surprising and certainly most significant developments since early 2020,” Brazil said.

Oh no, what a surprise!
So, all those facts about Europe reaching the highest employment level in its history, adding more jobs to manufacturing than ever, and industrial production going in 2021 above pandemic levels couldn't have pointed this out? Another nail in the coffin to all those chanting the doom and gloom sutra about the future of Europe but I'm not surprised they can't stop themselves, so much envy and so much hate! Delicious!

It seems that we are witnessing the beginning of the next large-scale crisis on a global scale - the fall of the Chinese economy! China's economy is one of the largest in the world, and the clear leader in Southeast Asia. But I have been saying for a long time that it is export-oriented, and is highly dependent on the US and EU consumption markets. And if the US, in the first place, and the EU in the second place, greatly reduce the consumption of goods from China, this will bring down an already not very stable economy.

But, but, bro, they have Russia!
Don't you hear it? China is planning to replace its $500 billion (US) and €223 billion (EU) with Russia, lol, with Russia!!!!! And all this, while somehow Russia's plan is to replace all Eu imports with local manufacturing, so, this plan seems to have some kind of flaw but I can't really pinpoint it!
Seems like that famous new world word order is going to be a short-lived dream in some madman's mind.
Again, delicious!!! 

This reflects a significant decline in the purchasing power of american consumers. As the world's largest consumer market the united states represents a significant portion of global purchasing power. A market which major exporters of the world have catered to. The US consumer market however appears to be drying up as rising fuel and food prices cut into the disposable income of average to even middle class consumers.

I always warned the ones thinking that the EU and US economies even having a hiccup will send the ones depending on them into a coma, but no, this will be a boost for emerging markets, no way, COVID seems to not have been an economic lesson to the ones that saw thousands of jobs being destroyed in countries not really affected by the pandemic but by no interest in purchase from importers elsewhere.

https://e.vnexpress.net/news/economy/layoff-wave-sweeps-vietnams-manufacturing-hub-as-export-orders-dwindle-4540019.html

According to the Vietnam General Confederation of Labor, the ongoing order shortage has affected more than 630,000 workers in 28 provinces and cities from September-November. Nearly 570,000 workers have had their working hours reduced, another 34,000 plus have lost their jobs and more than 31,000 have had their contracts suspended and cases of unpaid leave or contract suspension.

[Fortify]

According to this, the united states has seen a decline of imports arriving on the west coast from china. Accompanied by a simultaneous boost in the arrival of imports from europe on the east coast. This shift in trade routes from west to east however does not do anything to counteract the high decline in shipping volumes.

This reflects a significant decline in the purchasing power of american consumers. As the world's largest consumer market the united states represents a significant portion of global purchasing power. A market which major exporters of the world have catered to. The US consumer market however appears to be drying up as rising fuel and food prices cut into the disposable income of average to even middle class consumers.

While many might have the impression that rising prices affect low bracket earners for the most part. Recent studies have concluded that many middle class and even high income earners also do not have much salary left over after deducting the high price of rent and other monthly fees. So it seems that everyone is tapped out due to cost of rising expenses.

What we have seen so far could only be initial reactions. With bigger shifts coming later on.

There are so many factors involved that's it's impossible to pin the reason on any single thing. We've had Covid which was a devastating shock to global supply chains, after which China has been stuck in a limbo with their zero Covid strategy causing huge disruption due to random lockdowns for the last three years. Shipping costs have also soared in that time, a container price went from something like $8k to $24k at one point. Oil prices have also been erratic which filtered out into the wider economy and pushed up the price of everything. Food as well, thanks to Putin's war in Ukraine - two countries who are massive food producers are now engaged in battle for no reason at all.

[DrBeer]

But, but, bro, they have Russia!
Don't you hear it? China is planning to replace its $500 billion (US) and €223 billion (EU) with Russia, lol, with Russia!!!!! And all this, while somehow Russia's plan is to replace all Eu imports with local manufacturing, so, this plan seems to have some kind of flaw but I can't really pinpoint it!
Seems like that famous new world word order is going to be a short-lived dream in some madman's mind.
Again, delicious!!!

......

I always warned the ones thinking that the EU and US economies even having a hiccup will send the ones depending on them into a coma, but no, this will be a boost for emerging markets, no way, COVID seems to not have been an economic lesson to the ones that saw thousands of jobs being destroyed in countries not really affected by the pandemic but by no interest in purchase from importers elsewhere.

1. Well, it's stupid to change an almost worthless piece of a degrading and depressive territory for real money
2. The problem is that some, to put it mildly, not very smart "analysts" believe that quality is directly proportional to quantity or size. This also applies to China (their economy) and their resource appendage, which has the largest area! The Chinese economy is BIG. But it is not self-sufficient, and dependent both on Western technologies and on the consumption market of the same US and EU.
That China, of course, dug a hole into which it fell - it forced the EU and the USA to begin developing their industry and production to replace goods from China. At the same time, the US and the EU receive a double benefit:
- the rise and development of their economies after the pandemic and other problems of recent years
destroying the Chinese economy.

[el kaka22]

I am sure it has something to do with the fact that the world just went through some of the worst economical crisis it had, and we are not out of the woods yet, we are at recovery stage. By 2025 nothing from this period will be still felt, and everything will go back to normal, but for now we are still feeling it and in 2023 we will still feel it, it needs couple years to recover.

Remember 2008 crisis, were we great in 2009 or 2010 right away? It took us 3-4 years at least to get back to normal levels, and to be fair I can say maybe like 2015 or so was a great year, before that it was just recovery small by small. So, I do not think that this will suddenly be better in a year.

[Smartprofit]

According to this, the united states has seen a decline of imports arriving on the west coast from china. Accompanied by a simultaneous boost in the arrival of imports from europe on the east coast. This shift in trade routes from west to east however does not do anything to counteract the high decline in shipping volumes.

This reflects a significant decline in the purchasing power of american consumers. As the world's largest consumer market the united states represents a significant portion of global purchasing power. A market which major exporters of the world have catered to. The US consumer market however appears to be drying up as rising fuel and food prices cut into the disposable income of average to even middle class consumers.

While many might have the impression that rising prices affect low bracket earners for the most part. Recent studies have concluded that many middle class and even high income earners also do not have much salary left over after deducting the high price of rent and other monthly fees. So it seems that everyone is tapped out due to cost of rising expenses.

What we have seen so far could only be initial reactions. With bigger shifts coming later on.

There are so many factors involved that's it's impossible to pin the reason on any single thing. We've had Covid which was a devastating shock to global supply chains, after which China has been stuck in a limbo with their zero Covid strategy causing huge disruption due to random lockdowns for the last three years. Shipping costs have also soared in that time, a container price went from something like $8k to $24k at one point. Oil prices have also been erratic which filtered out into the wider economy and pushed up the price of everything. Food as well, thanks to Putin's war in Ukraine - two countries who are massive food producers are now engaged in battle for no reason at all.

In my opinion, in this situation, everyone will lose.

I look with horror at the growing degradation of the economy and culture in my country, but I understand that we live in a global world and all these negative processes, one way or another, will spread throughout the planet.  The planet's resources are limited.  If each of the countries begins to independently produce microchips, this will result in a slowdown in scientific and technological progress throughout the world.  

Yes, Europe will achieve success in microelectronics, but the initial products are likely to be of poorer quality than under the conditions of the global division of labor.  

And this will happen in all areas of human life.

[uneng]

US is trying t decrease its dependance on chinese exportions and they seem to be doing this gradually. The division in the world is getting deeper and in a decade or two we will be even more segregated than now, between occident and orient. Each side of the world trading among themselves, while attempting to overcome the opposite side on economical and military aspects.

Personally, I see the increasement of imports from Europe good news if they can supply the occident with goods superior in quality than the chinese ones, which are well known for being cheap, but with low durability and high fragility.

[DrBeer]

US is trying t decrease its dependance on chinese exportions and they seem to be doing this gradually. The division in the world is getting deeper and in a decade or two we will be even more segregated than now, between occident and orient. Each side of the world trading among themselves, while attempting to overcome the opposite side on economical and military aspects.

Personally, I see the increase of imports from Europe good news if they can supply the occident with goods superior in quality than the chinese ones, which are well known for being cheap, but with low durability and high fragility.

I have a strong suspicion that prior to certain actions by China, the US did not plan to take tactfully drastic steps to "de-sinify" part of its economy.
The trigger for launching these processes was ... the behavior of China itself. And it was China that "showed the way to solve at least two problems in the United States."
What does the US get with this vector?
Yes many !
1. New jobs in the US. This is a reduction in tension, this is a "+" in the karma of the president, this is a "return" of the status of an advanced technological country, from the point of view of a full cycle, taxes, and much more
2. Everything is the same, only with a MINUS sign for China. For China, which decided, under the guise of the global crisis and the terrorist war unleashed by Russia in Europe, to show its "protruding ambitions." This applies to Taiwan, which is very significant for the whole world and the United States, in the first place, where the lion's share of microprocessors of the "major league" is produced.
3. Show the whole world that the US can both easily give (technology to China) and easily take away. And who would not say anything about the huge economy of China - it is DEPENDENT on the West. It depends on how much the West will buy (paying with hard currency, which is critically needed by China). And the Chinese economy is dependent - TECHNOLOGICALLY. And technology is the west, not the east ....

[buwaytress]

And who would not say anything about the huge economy of China - it is DEPENDENT on the West. It depends on how much the West will buy (paying with hard currency, which is critically needed by China). And the Chinese economy is dependent - TECHNOLOGICALLY. And technology is the west, not the east ....

Might also remember while hard cash is needed, China is also sitting on a huge and growing pile of foreign reserves (1/3 of the world's foreign reserves, which it of course needs to continue sitting on in the short term to continue their export policy).

I wouldn't say it's critical. They may be forced to finally show their hand and that would actually be a bone-cruncher on the rest of the world.

Tech not in the east? Not sure that's going to be the truth for much longer, if at all now. Japan, SK, Spore, even China itself, at least on a more distributed level.

[Kakmakr]

I think it is a combined after affect of the US economic sanctions and also the impact of the Covid pandemic.... most economies are struggling and their citizens are buying food and paying their expenses.... there are no disposable income to spend on cheap Chinese exports.

The markets are shifting and you seeing more exports from China to other parts of the world, specifically Africa .... where they can dump a lot of technology that cannot be manufactured in those countries. (Lack of skill & education) 

[dezoel]

USA should stop being the money printer of the world to begin with. They keep printing money and then buy something with it from other nations and then they print more when they have none left and we act as if that's okay.

I am sorry but USD doesn't really have the value it used to have, we put value into it, normally I would prefer to go towards Euro a long time ago, even if that doesn't look as strong right now, it has a clearer future right now and looks to be backed by people with actual economic goal, not people who just do whatever they want and show you a guy afterwards to make you accept. China is doing worse because they dependent on others money, that is the main issue.