China’s Covid uptick may impact US clothing shipments

A rise in Covid-19 cases in the Chinese clothing and textile manufacturing hub of Guangdong is exacerbating already fraught global logistics and putting further pressure on apparel and footwear orders. The southern Chinese province recorded 135 total infections over the period 10-23 June and a seven-day average of nine new cases as of 23 June, according to data from Johns Hopkins University in the US. While the infection rate is low compared to other countries, China is working to stamp out the virus nationwide, with zero new cases recorded in Beijing, Hubei and other key provinces for several months. In Guangzhou, the provincial capital of Guangdong, the highly contagious Delta variant was found to be the dominant strain among infected people in late May. This prompted local authorities to implement strict countermeasures to try to contain it. Stay-at-home orders and infection control procedures continue to disrupt manufacturing capacity as well as transport and shipping from Guangdong. The manufacturing powerhouse is responsible for about 10% of China's overall economic output. In particular, the quarantine and disinfection protocols at Yantian International Container Terminal, in Shenzhen, near Hong Kong, have caused severe congestion of ships. The port accounts for 10.5% of China's foreign trade container output, according to the World Shipping Council. The disruption at Yantian, where the virus was found among port staff, caused more than 40 container vessels to anchor in open water outside the terminal on one day in early June, according to ship tracking data from Refinitiv. Top trade hub The impact is far and wide but it could be particularly felt by the United States, a top four global trading partner of Guangdong. The manufacturing powerhouse accounts for about 10% of China's overall economic output. Julia Hughes, president of the US Fashion Industry Association (FIA), says the continued spread of Covid-19 is resulting in "ongoing delays and higher prices" for much of the association's membership. Although members have yet to report any logistical issues as a direct result of the uptick on coronavirus infections in Guangdong, she said the impact may still be felt in future, given the time clothing and textiles take to be shipped from China to the US, and then on to retail outlets and manufacturers. Goods can take at least 15 days to reach American Pacific ports and 265 days to be offloaded at US east coast ports, according to China, Singapore and Thailand-based sourcing agency Guided Imports. Series of shocks Should serious delays in deliveries occur, it would be the latest in a series of shocks to the US clothing and footwear industries, which rely heavily on imports from southern China, notes Satish Jindel, president of US-based SJ Consulting Group. Indeed, US retailers have already been experiencing reduced shipments from the Chinese province to the US, says Jindel, attributing this "dampening" of movement to the US-China trade war and extra punitive tariffs on apparel imports into the US. Imposed by the President Donald Trump administration, these have yet to be removed by his successor President Joe Biden. On cotton shirts, for example, the extra punitive tariff remains 7.5% on top of the regular duty rate of 19.7%. Uncertainty and lead time These problems have been compounded for US retailers by shipping and logistics delays from Asia into the US. Jindel points to the ongoing backlog in docking and unloading ships in Los Angeles port. The holdup has aggravated difficulties by creating delays in container availability in Guangdong and Asia in general. Other large ports have also been hit by the general Asian resurgence of Covid-19, not only in China, but in India, Bangladesh and elsewhere. Foreign trade container throughput at China's eight major ports was minus 1.6% year-on-year from 1-10 June, according to the China Ports and Harbours Association. "With the increase in Covid cases in all parts of Asia, including Guangdong, many key shipping hubs like Singapore are facing increased transit time for feeder ships, which used to consolidate containers from various smaller ships from ports in Vietnam, Thailand, Indonesia and so on," says Jindel. This is creating further uncertainty and lead time. And with other Asian countries' production and distribution being hit by additional pandemic waves, the ability to fill up containers quickly en route from China to the US is proving difficult. "Countries like Indonesia, Vietnam, Thailand and India are grappling with increased Covid cases and related restrictions in light of their extremely low vaccination rate, hence the lack of production from Guangdong is being felt even more," he says. The combined result is rising apparel prices, which has helped push US inflation in May to a 13-year high of 5%.