China Blue News: China Blue Observation | Middle East Situation Upgrades, Zhejiang's Diversified Foreign Trade Response

Zhejiang is the largest province in China for exports to the Middle East. Recently, the situation in the Middle East has remained tense. What is the impact on Zhejiang's foreign trade and how should enterprises effectively respond?
At this hardware store in Zone 2 of Yiwu International Trade City, Zhang Cuiyan, who had originally agreed to arrange shipments to customers in the Middle East at the Yuyao factory during this period, is now scrolling through information about the Middle East situation in the store every day. She told reporters that since the conflict occurred, several old customers have requested a suspension of shipments, and orders worth millions of yuan are still piling up in the form of raw materials.
Zhang Cuiyan, General Manager of Guanjiang Hardware Tools Co., Ltd.: This has resulted in a significant backlog of inventory for us, and another factor is that it will gradually lead to issues with our later order scheduling. We will definitely tell the guests that it's okay, as long as you are healthy, this difficulty will be overcome. As long as someone is here, everything will be there in the future.
The Jinhua area where Zhang Cuiyan is located has gathered more than 3700 trade oriented enterprises exporting to the Middle East and more than 3200 production oriented enterprises, with exports to the Middle East accounting for over a quarter of the province's total. Yiwu Paisite Trading Co., Ltd. has been providing freight forwarding services for more than 200 Iranian buyers for a long time. In the past two days, the person in charge has finally restored contact with the lost customers, but the New Year's orders received earlier are still piled up on the office desk.
Gong Juanjun, General Manager of Yiwu Paisite Trading Co., Ltd.: Due to the uncertainty of war, if the cabinet is halfway through and something is said, it will cause great losses to the customers. Therefore, it is temporarily suspended.
Not only Middle Eastern orders have been suspended, but also several leading shipping companies such as Maersk have announced the suspension of bookings for Middle Eastern routes due to the closure of the Strait of Hormuz. At Yite Overseas Worry Free Import and Export Co., Ltd., which specializes in logistics business in Saudi Arabia, the foreign trade manager, John Huang, keeps an eye on the global ship dynamic query service website every day. Over 200 containers previously shipped by the company have been stranded for more than a week at ports outside the Strait of Hormuz.
John Huang, Foreign Trade Manager of Yite Overseas Worry Free Import and Export Co., Ltd.: Nowadays, the payment method for Shuangqing door-to-door is basically settled before delivery after arrival at the port. Our shipping costs are all advanced by the company here, with nearly 600000 US dollars in funds (logistics fees) pressed on the sea.
According to data from the Ningbo Shipping Exchange, the freight rates on the Middle East route have recently increased by over 82% month on month, with the highest volatility among all routes. Multiple logistics companies have reported that the Red Sea route is difficult to resume due to the spillover effects of geopolitical conflicts, and detouring around the Cape of Good Hope in Africa will double their logistics costs.
Qian Hanglu, an industry analyst at Ningbo Shipping Exchange: If this route is interrupted for a long time, it will lead to a tight situation in global transportation capacity, with ships trapped in the route and unable to release to the entire shipping market.
In the face of difficulties, confidence does not diminish. Recently, Yiwu Yilinno Sanitary Ware Company is helping customers analyze the priority of goods. A Yemeni customer has expressed a shortage of inventory and is willing to bear the logistics costs appropriately. The company will prioritize the delivery of scarce materials based on local conditions.
Tao Juying, General Manager of Yiwu Yilinno Sanitary Ware Co., Ltd.: They don't have much inventory in their warehouse anymore, so when it's sent over, there will be stock available for sale. At the same time, adding up some of the costs, they will have stock available for sale when others don't have it.
Faced with a backlog of orders from the Middle East, Zhang Cuiyan took the initiative to ask the exhibition company for the exhibition schedule. This year, she plans to lead the team for the first time to explore African markets such as Tanzania and Kenya.
Zhang Cuiyan, General Manager of Guanjiang Hardware Tools Co., Ltd.: We are a factory ourselves, and we have strong controllability. We have confidence in targeting our customers.
At present, for enterprises in the Middle East that have the need to delete orders and return them to customs, the customs has established a system of customs enterprise coordinators to accelerate processing speed during special periods and help enterprises alleviate capital turnover pressure.
Zhang Yuanchi, Deputy Director of Yinzhou Customs under Ningbo Customs: Actively coordinate with relevant customs units at the port and dock to help enterprises smoothly handle the procedures of deleting and returning customs, and minimize their losses to the greatest extent possible.
In addition, some freight forwarding companies plan to accelerate the layout of the Middle East air freight network, prioritizing the use of air freight for high value-added and lightweight goods to ensure supply chain stability. Experts remind that in the event of ongoing conflicts, foreign trade enterprises need to be vigilant about the risk of subsequent intermediate goods price increases, and timely synchronize the situation dynamics with the expected arrival of goods at the port. The Provincial Council for the Promotion of International Trade has opened a legal service hotline to provide relevant consulting services.
Li Xinshi, the second level inspector of the Information Service Department of the Provincial Council for the Promotion of International Trade: We should lock in the freight rates as early as possible, use some policy tools, especially policy insurance tools, to reduce some risks for our trade. Enterprises still need to maintain sufficient confidence and patience to prepare for the recovery of Middle East trade in all aspects.