China’s military exercises are making ships think twice about heading into one of Taiwan’s most important ports, creating potential delays for shipments of electronic goods.
Ships are dropping anchor at sea to avoid a drill zone located just outside Kaohsiung port in the south of Taiwan, said Jayendu Krishna, deputy head of consultancy Drewry Maritime Advisors. The zone, one of the largest areas where China is carrying out exercises, is 15 nautical miles away from the entrance of the port.
Ship owners, worried about the possibility of missile strikes, are choosing to idle vessels and burn extra fuel until the drills pass.
“They will avoid going to Kaohsiung for the next two to three days, because that’s directly in the line of fire,” said Krishna. “Some dry bulk ships and tankers have been asked to anchor and wait for orders.”
Kaohsiung is operating normally, and there is no unusual ship congestion off the coast, according to the port’s vice president, Su Jiann-rong. “There has been no impact from the military drills so far,” he said, adding that there are empty piers available in the harbor.
No ships have cancelled plans to enter or leave ports on Thursday, according to a statement from Taiwan’s Transportation Ministry.
The Taiwan Strait is a key route for supply chains, with almost half of the global container fleet passing through the waterway this year. While vessels are continuing to travel through the strait during the military exercises, they are navigating around the drill zones.
Some shipowners have barred their vessels from transiting the strait. Two liquefied natural gas suppliers informed ships to not travel through the waterway until they can confirm the military drills have ended, according to traders with knowledge of the matter.
At least two very large crude carriers en route to Kaohsiung have been diverted to Sha Lung port, at the northern end of the island nation. The supertanker Barakah switched its destination on Aug. 2 from Kaohsiung to Sha Lung, while the VLCC Ghinah also changed its route to avoid the military drill zone.
Kaohsiung is a major gateway for vessels picking up Taiwanese semiconductor chips, and is also where state-refiner CPC Corp. makes petrochemicals to supply manufacturers around the world, said shipping experts.
Additional delays are likely to ripple out and eventually affect shipments of Asian goods headed to the US, said Drewry’s Krishna.
The company, one of the world’s biggest container shippers with a market share of around 17%, revised its outlook for global container demand to the lower end of its range between minus 1% and plus 1%.
The new guidance is based on a gradual normalisation in ocean container shipping in the fourth quarter of this year. Its previous guidance was based on that happening early in the second half of the year.