Date: Friday, March 18, 2022
Source: Sourcing Journal
Lockdowns across China have created new supply chain uncertainties, but one factor that’s become clear: shippers can expect a rise in rates once restrictions are lifted and operations resume.
“These new lockdowns have the potential to worsen disruptions significantly. We may see further price hikes and deeper delays in the days and weeks ahead,” Flexport global head of content Trips Reddy said in a Tuesday research note. “It is fair to assume that cargo originating in Shenzhen will remain in place for at least the next week.”
China’s health commission reported Tuesday 3,602 new cases of Covid on the Chinese mainland as lockdowns continue to spread. Multiple cities and provinces are under stay-at-home orders now, including Shenzhen, Dongguan and Jilin in response to China’s zero-Covid policy. Tuesday brought a lockdown in Langfang, which borders Beijing.
Movement by ocean, air and truck are all impacted to varying degrees, with the current challenge stemming from the workforce needed to move cargo. With employees being told to work from home and tightened restrictions on movement that require negative nucleic acid testing for truck drivers, fewer workers are available, which means lengthier delays.
Circumstances have created unpredictability when it comes to logistics capacity, according to Reddy.
Ships are still being allowed in, but with no one to move containers “disruptions are imminent,” Reddy said.
“Any potential disruptions or delays at the Yantian International Container Terminal in Shenzhen—one of China’s busiest ports and the fourth largest in the world—could cause significant shipping delays across a wide range of products,” Reddy said.
The same goes for air freight and also product moving by truck. Flights between Shenzhen and Hong Kong have been temporarily suspended for at least the next week, causing a lift in rates for alternate routes. Cross-border trucking between Shenzhen and Hong Kong has also been stopped through at least Sunday.
Project44’s Supply Chain Crisis Tracker, which monitors global events’ impacts on the transportation sector, found that lockdowns are giving way to early signs of congestion at the Port of Yantian with the number of ships queuing to berth up 28.5 percent since Sunday, when the Shenzhen lockdown was announced.
“Just as global trade is coping with impacts from the war in Ukraine, new Covid outbreaks in the major Chinese export hubs of Shanghai and Shenzhen, has the supply chain bracing for the latest in a too-long series of shocks,” wrote Judah Levine, head of research at shipping and logistics technology company Freightos Group.
Levine pointed to last May’s shutdown at the Port of Yantian, one of several ports that make up the Port of Shenzhen, last May as a possible indication of things to come. Activity there fell 75 percent in May and June as a result of the Covid outbreak and required roughly three weeks to bounce back. Rates by ocean increased more than 25 percent from Asia to the U.S. due to the congestion that followed, according to Levine. Routes from Asia to Europe rose 21 percent.
Worldwide Logistics Group, with operations in China, said Tuesday its Shenzhen office is closed and customers can expect shipment delays given road and warehouse closures.
The company’s Shanghai office has a small number of staff working in the office, with the majority now remote, while offices in Xiamen and Fuzhou are operating normally.
In northern China, the company’s Qingdao office is also operating under normal conditions, but the company pointed out the lockdowns in Jilin and nearby Changchun have led to some road closures, impacting export movement.
“While carriers and port owners claim that terminals are operational, lockdowns mean that factories, warehouses and distribution centers are shuttered, and trucking capacity is constrained,” Worldwide Logistics Group said in an update Tuesday.
Logistics company Geodis said Tuesday its offices in Shenzhen, Shanghai and any other areas impacted by a lockdown order would move to remote work.
Geodis also noted impacts to domestic and cross-border goods movement, with pickup and delivery completely stopped in Shenzhen, Dongguan, Jilin and Changchun. Those same services are impacted but not completely halted in Shanghai, Weihai, Zibo, Yantai, Laixi, Tianjin and Jiangsu Province.