According to Maersk, the world’s second-largest container shipping company, the 1st quarter of 2022 witnessed another wave of COVID-19 flareups in China, creating big concerns for the global supply chain.
y the end of March, Shanghai and Jilin, a Northeast province in China, reported a vast majority of new cases. China continues to utilize its dynamic zero-covid policy and prioritizing people’s life and welfare above all else in combating the pandemic.
Recently, Maersk had highlighted that the Shanghai lockdown will have a great impact on trucking services and will increase transport costs. The congestion at the port, which is already high, clearly depicts this situation.
How China is dealing with the situation
In early March, four large cities were in lock down and Shenzhen, China’s Silicon Valley and Tech Hub, was one of them. During its lockdown period (14-20 March), millions of residents were asked to go through NAT to detect the virus at the early stage, in efforts to contain the spread. Shanghai has also been heavily hit and witnessed a continuous growth on daily new asymptomatic cases reaching 6311 on April 1st.
Given this context, local authorities have imposed a lockdown in the city with the plan to lift on April 5, 2022. Shanghai ports (Waigaoqiao and Yangshan) are currently working as per normal though, including vessel operations, yard handling and gate-in-and-out. Up to April 2, Maersk has not omitted any of its Shanghai calls or diverted calls to other ports due to Covid.
On the other hand, warehouse in the lockdown area is seriously impacted. It is foreseeable that the efficiency of Maersk trucking services from/to Shanghai will be further impacted due to the lockdown and we are providing multi-modal services via barge and rail as alternative solutions between Shanghai and nearby cities. For airfreight, gateway operations are normal in Shanghai. However with more airlines cancelling flights for the coming days, more volumes will be shifted to other airports in China, including Zhengzhou and Beijing.
Solutions at hand
In continued support to businesses throughout this difficult period, the government has unveiled an array of relief measures for businesses aiming to mitigate impacts on the economic and social development in a timely manner.
On 15 Mar, the national health commission released a new Diagnosis and Treatment Plan for COVID-19. The 9th edition has adjusted the management of release from isolation and discharge criteria, with isolation management and post-discharge going from 14 days to 7 days, optimizing the measures and actions in combating the virus.
On the other hand, Chinese authorities have voiced their determination to keep supply chains moving, as shown in the approach to keep ports and terminals operational.
How will this Affect Trade?
The situation in China will cast a challenge onto the global supply chain recovery. The pandemic has revealed how lean the supply chain has become and any small disruption in the country will likely lead to ripple effects across the world.
Local lockdowns and other quarantine measures especially those surrounding Shanghai cause supply chain bottle necks primarily stemming from the trucking capacity shortage. Overall all terminals continue working as per normal with minor congestion caused by bad weather. Major impact is still at customer landside operation (factory, warehouse and trucking) where positive cases identified. Urgent support measures were implemented to help truckers to get back to business. Haulage services are back to normal in other ports in China.
At this point, domestic railway service has not been severely impacted which just requires planning in advance as the anti-epidemic policy mainly affects last/first mile operations. there will be noticeable drop-in trucking services between Shenzhen and nearby cities due to stricter Covid-19 controls and need for drivers to have frequent NAT leading to longer delivery times and higher transport costs.
In Hong Kong, together checks and tests on cross-boundary truckers have led to a cut of at least 70% in trucking capacity, which in turn is having a domino effect in the rest of the supply chain. The same challenge also applies to Shanghai for inter-provincial pick-up and drop-off.
Air freight also is affected, as airlines reduce the frequency of flights due to a decline in demand. Airlines are frequently adjusting their schedules to adapt to these impacts and fluctuation in volumes in recent weeks. Authorities have rerouted international passengers flight bound for Shanghai to other cities, with at least 106 flights scheduled to be delivered through May 1.
Very recently, the Predictive Maritime Intelligence company, Windward, released insights on how container shipping operations were affected by the Shenzhen’s 7-day lockdown.