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A spate of lockdowns in Shanghai and other Chinese cities has put enormous pressure on transport and logistics across the country, exacerbating the Economic impact The government’s commitment to its zero Covid-19 policy comes as cases continue to soar to record levels.
The disruption has particularly affected the trucking industry, which plays a key role in moving goods between cities and some of the world’s largest ports, but is now subject to severe restrictions on drivers and deliveries to sites with positive cases.
“Freight is the main issue for us,” said Mads Ravn, executive vice president and global head of air freight procurement at DSV, one of the world’s largest freight brokerages. Booking truck services is nearly impossible, he added, while flight activity to Shanghai Pudong Airport was only 3 percent of the previous month, and air cargo was limited to essentials such as medicines.
“Basically everything else hasn’t moved, it’s moved from Shanghai to the rest of China. It affects every commodity you can think of,” he said. “It will have a global impact on almost every transaction.”
China is grappling with Worst Coronavirus Outbreak Since it first appeared in Wuhan more than two years ago. On Wednesday, the country recorded 20,614 confirmed cases in the past 24 hours, the most in a single day.
In late March, Danish shipping company Maersk warned that the city’s lockdown measures would reduce trucking services to and from Shanghai by 30%.But since then, restrictions that were supposed to split the city in two initially Staggered nine-day blockade, became more serious and flooded, covering the entire city at once. It is unclear when those measures will be eased.
The measures, which sparked complaints in Shanghai about the difficulty of getting food as drones patrol the empty streets, are being implemented more widely in China as Chinese officials struggle to contain a worsening outbreak. Japanese bank Nomura estimated this week that 23 cities and nearly 200 million people are under complete or partial lockdown.
“These figures may significantly underestimate the overall impact, as many other cities are conducting large-scale tests on a district-by-district basis, and mobility is severely restricted in much of China,” said Lu Ting, chief China economist at Nomura.
“Many entrances and exits on inter-provincial highways are blocked, and there is no concerted effort among provincial governments to ease the supply chain crunch,” said Bo Zhuang, an analyst at asset manager Loomis Sayles in Singapore.
Courier companies in Anhui and Jiangsu provinces in eastern China and near Shanghai told the FT that they were unable to deliver packages to any area where local transmission cases were reported, including Shanghai.
Orders on Taobao, an online marketplace popular with Chinese consumers, were delayed by the lockdown measures.
In addition to domestic disruptions, analysts warn that any inland logistical bottlenecks will eventually lead to shipping delays due to increased cargo and orders – and the associated costs will surface when measures are finally eased.
“We’ve seen the déjà vu of this story many times once Shanghai reopens,” said Lars Jensen, chief executive of consultancy Vespucci Maritime. “There will be a surge in volume and upward pressure on the spot exchange rate.”
On Wednesday, the latest economic data showed the impact of the recent control upgrade, with China’s Caixin Services Purchasing Managers’ Index showing the worst month-on-month contraction in March since early 2020.
There is no evidence of unusually long queues for ships outside the world’s largest port, Shanghai, where authorities say the city is running a “closed-loop” system where workers don’t leave their workplaces after their shifts are over. But port cargo volumes tracked by supply chain data firm FourKites have fallen by about a third since March 12, as importers and exporters reroute their shipments.
The state-run newspaper China Daily said goods were increasingly being shipped to Shanghai by sea, as many neighboring cities blocked truck drivers from entering. Maersk said last week that it could provide services via “barge or rail as an alternative solution for corridors between Shanghai and nearby cities.”
But Bo said it was only a “temporary solution” because those diverted channels could also be blocked by lockdown measures as the virus spreads to more cities and provinces.
Additional reporting by Wang Xueqiao in Shanghai, Nian Liu in Beijing and Andy Lin in Hong Kong
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