China drills around Taiwan disrupt global supply chains

• Military drills around Taiwan disrupt global supply chains

• Some vessels continue to navigate through Taiwan Strait

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Shippers rerouted vessels as China began its most provocative military drills in decades around Taiwan, creating logistical headaches for global supply chains.

The maneuvers, announced by Beijing in the wake of US House Speaker Nancy Pelosi's visit to Taiwan, are taking place in six different areas around the island from noon local time Thursday until Sunday. China has advised ships and aircraft not to get near regions where exercises are taking place.

Polygons show military drill areas; last known vessel positions shown as of noon HKT, Aug. 4, in small white dots. Vessels currently in drill zones shown as colored larger dots

Some ships continued to travel through the Taiwan Strait on Thursday, with a few still in the drill zones, according to data compiled by Bloomberg. As of noon, there were approximately 15 vessels in the exercise regions, compared to 45 at the same time Wednesday. There were no ships in the zone closest to the China mainland in the Taiwan Strait.

Vessels are also being rerouted around the eastern side of the island, which will create delays of about three days, shipbrokers estimate. Delays of that duration aren't uncommon, and the long-term impact may be minimal if tensions ease next week. 

However, the risks for ships traveling through Chinese waters may be compounded by bad weather, threatening further delays. Shenzhen city, which hosts the Yantian container port and lies directly west of Taiwan's southern tip, issued a tropical cyclone warning, citing a low-pressure system about 117 kilometers (73 miles) away as of Thursday morning.

The Taiwan Strait is a key route, with almost half of the global container fleet passing through the waterway this year. The disruption is just the latest inconvenience for supply chains, which have been reeling since the start of the pandemic and Russia's invasion of Ukraine.

At least one liquefied natural gas tanker south of Taiwan changed course to avoid military drills, according to ship-tracking data compiled by Bloomberg. Several other ships are reducing speed to avoid the maneuvers, which will result in small delivery delays to Taiwan and other nearby countries, traders said.

Some agricultural container cargoes from Southeast Asia to China have been postponed to load next week to avoid the risks, while some couldn't be rescheduled and are still waiting for shipping companies' notices, according to a Shanghai-based commodity trader.

Taiwan's Maritime Port Bureau issued a notice warning ships to avoid the area where drills will take place as there is no fixed route for sea transportation, according to Taiwan's transportation minister Wang Kwo-tsai.

Taiwan's Formosa Petrochemical Corp. said Thursday morning there are currently no delays or postponements of cargoes heading to or leaving Mailiao port. CPC Corp., which has a refinery in Kaohsiung, located close to one of the drill zones, said its port operations remain unaffected.

"We're very careful and asking port and ship agents to be cautious, and to not go into the drill zones," said FPCC spokesman Lin Keh-Yen.