The Yangshan Deepwater Container Terminal at the Port of Shanghai, where trade flows have slowed because of citywide COVID restrictions. (Photo: /ABCDstock)
A mixed bag of circumstances and time horizons are creating diverging narratives about whether shipping delays stemming from the shutdown of Shanghai and other Chinese cities are getting better or presage massive supply chain gridlock.
While some cities in China, including Guangzhou are loosening COVID restrictions, rising COVID cases in Beijing are sparking fears the Chinese capital and other cities could join Shanghai, Suzhou and other major cities in lockdowns. Kunshan, a technology manufacturing hub west of Shanghai, has extended a lockdown, which began on April 2, to April 28. Several districts in Hangzhou, home to e-commerce giant Alibaba, began a lockdown on April 23, with mass testing being carried out for three days.
Based on current trends, China watchers say lockdowns won’t begin to ease until mid-May or possibly June as the government maintains its zero-COVID policy.
But snapshots of current throughput don’t measure how much deferred cargo is piling up in warehouses or will be churned out by factories working overtime to make up for lost time. A key reason cargo isn’t stacking up at the port is that the vast majority of truck drivers are restricted from freely moving around Shanghai and making deliveries at marine terminals.
Many logistics professionals remain concerned that a huge wave of cargo will be released once the lockdowns are lifted and swamp the handling capacity of local and overseas ports, compounding pressure on the traditional peak shipping season, according to logistics analysts. Shippers that haven’t placed orders yet could miss getting their goods in time for big shopping events such as back to school, Halloween and Christmas.
“Shipping is being very materially disrupted. In 2021, we calculated about six weeks were needed to /get back to normal flows for every week of shutdown. Given this effective shutdown is in its third week, we can expect three months or more before flows are restored to normal levels,” Michael Zimmerman, leader of the analytics practice for the Americas at consulting firm Kearney, told .
The slowdown in imports has prevented key raw materials from reaching manufacturers and many companies have either shut down or are operating at severely constrained levels.
Export-oriented businesses that rely on global sources for raw materials will not be able to fully recover until logistics networks increase their capacity.There is a high risk that many industrial, technology, and automotive companies with suppliers in Shanghai and Kunshan will have tohalt operationsdue to component shortages, should the current lockdowns in both cities continue into the month of May, says Everstream Analytics, which uses artificial intelligence to help companies predict supply chain threats.
Factory shutdowns due to COVID are higher now in Shanghai than any comparable period in China. (Source: Everstream Analytics)
At least11 Apple suppliershave been impacted by the lockdown, Everstream reported in an update. Foxconn, a key Apple supplier, halted production at plants in Shanghai and Kunshan.
Shanghai authorities last week gave 660 companies the green light to restart operations. But ongoing restrictions prevent many workers from reaching the plants and many are functioning with less than half their workforce, according to various reports. The plants must have workers staying in a closed bubble environment.
While the Port of Shanghai continues to operate, port productivity has decreased 20% to 30% and some carriers are not calling the port. Shipping delays are impacting intra-Asia trade, as well as North America and Europe trade lanes, according to international logistics and trade finance companies monitoring the situation. When the Yantian terminal in Shenzhen went under quarantine a year ago productivity was slashed by 80%, but in that case the restrictions applied specifically to the port and not the city itself.
Several carriers are skipping Shanghai as a port of call until mid-May.
The Alliance (ONE, Hapag-Lloyd and Yang Ming) had canceled 36 voyages to Shanghai as of April 14, according to Michael Zimmerman, partner and analytics practice leader for the Americas at consultancy Kearney. The lockdown has also led to significant shortages of 40-foot containers and diversion of 20-footers to other Chinese ports.
Many carriers, including Maersk, ONE, Hapag-Lloyd, Mediterranean Shipping Co. and CMA CGM, have suspended accepting new refrigerated and dangerous goods cargo to Shanghai, due to insufficient storage space at Shanghai’s port for such specialized containers. Maersk said it resumed booking dangerous goods at the Port of Shanghai on Friday as yard density begins to improve.
According to ’ SONAR, ocean demand out of Chinese ports to the U.S. dropped 31% between April 6 and 15. Other factors, including lower consumer demand, could also be involved, experts say. Real U.S. retail sales are down from last year as inflation squeezes pocketbooks and people spend more on services.
SONAR shows ocean volume decline in recent weeks from Shanghai to California.
Ocean freight bookings from China to the U.S. are about the same as last year at this time, according to Customs data compiled by SONAR.
Drewry Shipping Consultants reports container volumes from Shanghai to Los Angeles and Shanghai to New York are down 17% and 16%, respectively, since the beginning of the year.
Airport troubles
Freight shipments through airports arguably are being jammed more than at ports, but also are subject to rapidly shifting dynamics.
Since March, inbound airfreight has experienced 10 to 20 days delay due to airport customs closures in Shanghai and quarantine rules at other major airports. Outbound volumes have also declined. Once the lockdown eases, airfreight will pick up pace, with courier services taking a bit longer to recover, said Huang.
Many passenger and cargo airlines continue to cancel flights in and out of Shanghai. Cargolux, for example, stopped operating there until Monday.
Cargo terminals at Shanghai’s airport have suspended on-site X-ray security testing and testing service for chemical goods, according to a recent customer update from Crane Worldwide Logistics.
Air cargo diverted from Shanghai is disrupting freight operations at other Chinese airports, causing a shortage of pallets for exports, Chicago-based AIT Worldwide Logistics reported.
Meanwhile, Shenzhen International Airport imposed a daily import cap of 250 tons, including 125 tons for perishable and temperature-controlled cargo from April 21 to 27. During this period, the terminal won’t accept dangerous goods, loose cargo or cargo destined for Shanghai, the logistics provider said.
While air cargo operations are functioning at the Shenzhen and Guangzhou airports, shipping and logistics giant Maersk warned customers that lead times for reserving space on aircraft are now two to three weeks due to the increased volume diverted from Shanghai.
Import operations are suspended in Nanjing.
AIT Worldwide Logistics reports that Air China’s terminal is back to normal operations, but China Southern’s terminal remains closed at Guangzhou airport. In Qingdao, air imports must be stored in the terminal for 10 days following disinfection. Wuhan has a three- to four-day backlog of air cargo because truck deliveries are suspended to cities facing outbreaks. Tianjin, in north China, is also preventing truck movements to cities with rising case counts.
