China’s ongoing Covid lockdowns have created supply chain disruption that could be worse than that experienced by traders around the world at the start of the pandemic in early 2020.
Logistics experts say that, with lockdown affecting 373 million people in cities that represent about 40% of China’s GDP, there is no early end in sight.
China’s biggest port, Shanghai, has faced Covid restrictions since late March but has allowed workers to continue operating the port in a ‘closed loop’ system.
Knock-on effects
Cameron Johnson, head of Asia Pacific at FAO Global, told Sky News that the knock-on effect would go through the whole supply chain.
“What you will see, if this continues, is at some point it will affect business in the UK. It may be just that delivery is delayed by a month or two, or it could be costs going up,” he said.
Worse than Wuhan
Fortune reports consultant Jon Monroe, who said: “It’s probably worse than Wuhan. You’re going to have a lot of pent-up orders.”
Lars Jensen, the CEO of the shipping industry adviser Vespucci Maritime, said that he doesn’t see any immediate end in sight to production and logistics disruptions in China.
“The supply-chain situation in Shanghai continues to worsen,” he said. “The port is running out of capacity for some types of cargo as importers cannot collect their goods.”
Airports too
As well as the port backlog, airfreight diverted from Shanghai Pudong (PVG) is now clogging up China’s other major airports, causing a shortage of pallets for exports, reports Loadstar.
Zhengzhou Airport (CGO), in central Henan, is said to be hardest-hit and it has now also started a two-week lockdown.
Restrictions spread to the port of Guangzhou last week as the city introduced mass Covid-testing which could further restrict exports, Loadstar also reports.
Quick normalisation
However, the container shipping industry could see a “very strong” pickup from later this month April as the Covid situation eases, according to Tim Huxley, founder of Mandarin Shipping.
CNBC reports that while it may take a while for things to normalise, Huxley says “considerable” comfort can be taken in China’s “incredibly quick” bounce back from its 2020 Covid lockdown.
Government action
The Chinese government has vowed to act to help supply chains return to normal, reports Reuters.
Looking to stabilise supply chains, the Ministry of Industry and Information Technology said it will work with 666 companies making semiconductors, automobiles, and the medical sector in Shanghai.
Vice Premier Liu He is reported to have said that authorities must ensure traffic permits for drivers are recognised and that transport should not be held up by drivers waiting for Covid tests.
“We should solve outstanding problems one by one in key regions,” Liu said, and that the government will create a “white list” of key industrial firms that need help.
Tech problems
Tech companies such as Apple, Google, Intel and Microsoft are being impacted by the lockdowns, reports Nikkei Asia.
Half of Apple’s 200 top suppliers have facilities in and around Shanghai where epidemic control measures are in effect.
