Shenzhen lockdowns to further shock supply chains

Date: Monday, March 14, 2022
Source: Supply Chain Dive

Dive Brief:

  • Eleven districts in Shenzhen, China, are on lockdown, with local officials restricting movement for more than 17 million residents amid a surge of COVID-19 cases, according to various media outlets.
  • The lockdowns will affect supply chains, as many companies rely on the port city as a major manufacturing, tech and logistics hub. Some manufacturers have already suspended operations.
  • The restrictions could further increase international freight rates and shipping container prices, which were already at record highs, Johannes Schlingmeier, co-founder and CEO of Container xChange, said in an emailed statement.

Dive Insight:

The lockdowns will be "nothing less than a major shockwave" to supply chains already straining to meet demand, Schlingmeier said. Their effects will combine with the closure of the Asia-European railway, which accounts for about 2.5% of Asia-Europe cargo, expected to push high-value cargo to a low-capacity ocean freight market.

Shenzhen's port handled 26.55 million TEUs of cargo in 2020, and the city does the country's second-most foreign trade by volume. The port saw an 8% drop in average container price in the past two weeks, but the lockdowns are expected to heavily restrict container movement, according to Container xChange.

"This will put more pressure on the already struggling supply chain," Schlingmeier said.

Shenzhen, in southern China, reported 86 new locally transmitted cases of COVID-19 on Monday, as a wave of infections spreads throughout the country. The new cases discovered in the "City of a Thousand Gardens" follow surges elsewhere in the country, including an outbreak in Shanghai of about 480 cases, most of them asymptomatic, earlier in the month.

Three criteria must be met for the lockdowns to be lifted, according to the Shenzhen city government:

  1. No new cases in a 14-day period;
  2. 14 days passing since the last close contact to COVID-19, or the close contact remaining under centralized quarantine for over four days with negative nucleic acid test results;
  3. All residents completing a negative round of nucleic acid testing in the two days before lockdown restrictions are lifted

Manufacturers are already reporting effects on their operations.

FoxConn Technology Group, an Apple supplier, suspended production at its factories in Shenzhen without a specific timeline for resumption, CNBC reported. More than 40 Taiwan-based makers of semiconductors and other electronic components said Monday they would temporarily close facilities in Shenzhen and nearby Dongguan, The Wall Street Journal reported.


[Read from the original source.]

Let's Start a Conversation