Shanghai Truckers Strike Mostly Fizzles, but Brings Internal China Logistics System Back into Focus

Just like independent truck drivers in the US and elsewhere, Chinese owner-operators have been feeling the sharp pinch of rising diesel prices, compounded there by a number of seemingly arbitrary and rising fees associated with moving goods.

So, in late April, some but by no means all independent trucks serving to move goods from around the region to the ports of Shanghai staged a mini-strike to protest their deteriorating economic conditions, as not only fuel prices but overall inflation is running hot in the country, up more than 5% in March, for example.

One year ago, labor actions at several Chinese manufacturing sites were fairly broadly reported in the country and led to the minimum wage in some provinces rising by more than 20%, leading to concern about the costs of manufacturing in China. However, the trucker strike in Shanghai mostly fizzled within a week. The action was barely reported on the state run media, and as a result the strike did not spread to other areas of the country, or even that widely in the Shanghai region.

China also jailed some of the striking truckers, and in the end all the strike achieved was a minor reduction in some trucker/container fees, saving the owner-operators maybe a couple of dollars a day but not having any meaningful change in the status quo. City officials also pledged to eliminate fees deemed to be abusive.

In reducing some of those fees, the Shanghai port authority did not mention the strikes, saying only that the fee cuts were aimed at “easing rising inflation and cost pressures on transport companies”.

“We’re paying a lot more money for fuel than we did three years ago, but what we get paid for freight has stayed the same,” the New York Times reports one independent Chinese truck driver near a Shanghai port as saying. “How am I supposed to survive?”

Interestingly, however, Chinese truckers and consumers actually pay less in fuel costs than most of the world due to government subsidies to reduce out of pocket costs for both groups. Chinese truckers currently only pay $1.05 per liter of diesel fuel, about 35% below the international market price, for example.

Many drivers wanted to stay on strike until a better deal was reached, but as some drivers accepted what the government offered and get back in their trucks, the holdouts reluctantly had to do the same.

Though several hundred truckers were said to be involved, the Shanghai-area strike never moved beyond selected container-handling terminals. The limited action never really threatened the city's overall logistics system that serves the large manufacturing region of the Yangtze River Delta, the most say port activity did slow down noticeably during the strike. Some contain ships were reported to be leaving port less than fully loaded.

Some unloaded containers were also said to be sitting in storage lots longer than usual awaiting to be moved, but It's back to business as usual now and that backlog should clear up soon.

Some observers wonder about the timing of the strike, which occurred at a relatively low point in terms of container shipping activity.

Duncan Innes-Ker, China analyst at the Economist Intelligence Unit, told Reuters that "If it had happened three months later, then I think people would be a lot more worried because the smallest disruption at that time could have ripple effects throughout the supply chain."

Brutal Competitive Environment for Chinese Truckers

The Chinese trucking market is made up of hundreds of thousands of independent truckers that get assignments from larger logistics firms that beat them down heavily on price. To survive, these truckers often take on excess weight, use very old trucks badly in need of maintenance, and pay bribes to avoid heavy fines and transportation restrictions, among other problems.

While the system has functioned well-enough despite this situation, many are concerned there can be real problems down the road as more and more manufacturing moves further inland in search of lower costs due to wage increases in eastern Chinese regions.

“Our concern is that as these factories move away from the coast, the service standards won’t keep pace,” said Ken Glenn of third party logistics giant APL told the New York Times this week.

A network of toll roads, with expensive prices usually set by regional levels of government, is another big issue. All told, trucking goods in China is often more expensive than it is in the US, with some of the delta being kept by the logistics firms hiring the poorly paid drivers.

According to the American Trucking Associations, moving goods by truck in the United States costs about $1.75 per mile when all costs are considered.

By comparison, trucking costs in China’s two biggest export regions — the Yangtze River Delta region near Shanghai and the Pearl River Delta around Hong Kong — are $2.50 to $3 a mile. That is despite low pay to Chinese drivers, who earn only a mere 25 cents an hour or so, versus about $17 an hour in the United States.

Obviously, any success by drivers in moving that wage scale up will only increase the costs of trucking in China.

However, despite continued growth in GDP and exports, most experts believe there is still an over-supply of drivers versus freight volumes in China, resulting in brutal competition for loads from logistics companies.

Source: http://www.scdigest.com/