US orders drop 40%! Chinese factories shut down two weeks ahead of the Lunar New Year

According to the latest report from CNBC, US manufacturing orders in China have fallen by 40% due to plummeting demand. Due to the decrease in orders, Chinese factories are expected to shut down production two weeks earlier than usual during the Lunar New Year.

Supply chain research firm Project44 noted that after reaching record trade levels during the pandemic lockdown, ship TEU (twenty-foot equivalent unit) volumes from China to the United States have fallen sharply since late summer 2022, with total ship container volumes falling 21% between August and November.

HLS cited trade data showing that U.S. imports from Asia plunged to a 20-month low in October. Spot freight rates for a container from Asia to the U.S. West Coast are already above the break-even point, with little room for further reduction.

Monaghan, CEO of Worldwide Logistics Group, said that container freight rates from Asia continued to fall due to a sharp drop in demand, with vessel utilization hitting a new low, forcing ocean carriers to cancel more sailings to balance supply and demand.

Blanked (cancelled) sailings data shows that vessel capacity on the transpacific route (China to the US) continues to drop significantly. Maersk and MSC's 2M Alliance has suspended nearly half of its US West Coast services in December. The Ocean Alliance (CMA CGM, COSCO Shipping, OOCL and Evergreen) and THE Alliance (Ocean Network Express, Hapag-Lloyd, HMM and Yang Ming Marine Transport) have cut overall vessel capacity by 40-50% until the Lunar New Year.

Overall business and order flows in Asia continue to be sluggish as carriers cancel more flights, with little upward momentum ahead of the Lunar New Year.

In addition, China's recent lockdown due to the COVID-19 pandemic continues to affect manufacturing operations and delay cargo shipments. There are also local access barriers to inter-provincial and inter-city transportation, mainly related to truck driver examination requirements, and truck capacity will be greatly affected.

CNBC Supply Chain Heat Map

Unlike the drop in orders from China, trade data analyzed by Project44 suggests that the Europe to U.S. route “is perhaps one of the most surprising and certainly one of the most important developments since the beginning of 2020.”

This sharp rise cannot be explained by the pandemic alone. But a strategic shift towards over-reliance on trade with China and geopolitical tensions with Russia are key drivers of the EU-US trade boom.

German exports to the United States increased by nearly 50% year-on-year in September. According to Project44, German mechanical engineering industry exports to the United States increased by nearly 20% year-on-year compared with the first nine months of 2022.

The global trade map is being rapidly redrawn, with EU trade with and investment in the United States rising sharply as economic relations between the West and China come under intense scrutiny. This year, the United States imported more goods from Europe than from China — a dramatic shift from the 2010s, according to Project44.

Editor✎ Ashley/

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