Manufacturing orders from China down 40% but Europe grows strong

US manufacturing orders in China are down 40 percent, says the latest CNBC Supply Chain Heat Map data, as Asia-based global shipping firm HLS warned about a combination of declining demand and overcapacity.

However, this report came before Monday’s trading in Asian markets which started the new business week on a positive note with Hong Kong’s Hang Sang up by 3.46 percent in response to China relaxing its Covid-related restrictions.

“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.

That’s why Worldwide Logistics 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.

However, there is another development which is very significant strategically and politically – increase in European manufacturing – as the West wants to end its dependence on China.

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

In this connection, HLS says US imports from Asia plunged in October to their lowest level in 20 months.

Although Beijing has now started reversing, or at least easing its Zero-Covid policy, 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 drop in manufacturing orders from the US and the EU is also impacting Vietnam, which has been booming as a manufacturing hub as more trade moved away from China, the CNBC reported.

Since early this year, 12,500 companies were closed per month, a 24.8 percent increase year over year, according to the Vietnam General Statistics Office report.

A combination of the lack of manufacturing orders and loan interest rates increasing from 6.5 percent to 13.2 percent 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 percent for December.

European manufacturing increase

Unlike the decrease in orders out of China, trade along the Europe-to-US route is one of the possibly most surprising and certainly most significant developments since early 2020.

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

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

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