China’s Covid-19 Outbreaks Extend Supply Chain Woes


Queues of container ships building up at major Chinese ports as Covid outbreaks in manufacturing export hubs threaten to unleash a fresh wave of global supply-chain shocks

 

The queues of container ships outside major Chinese ports are lengthening by the day as Covid outbreaks in manufacturing export hubs threaten to unleash a fresh wave of global supply-chain shocks, ship owners, logistics firms and analysts say.

China is experiencing its biggest spike in Covid-19 infections since an initial outbreak in the central city of Wuhan was contained in early 2020.

In the past 10 weeks, China has reported more new local symptomatic cases – over 14,000 – than in all of 2021 amid the rapid spread of the Omicron variant, fuelling fears of hard lockdowns of cities and economic instability.

Omicron’s spread has led to movement controls across China, including in key manufacturing hubs of Shenzhen and Dongguan, paralysing factories making goods from flash drives to car parts.

China’s public health governance is expected to come under acute pressure in coming weeks as the biggest wave of  cases since the 2020 Wuhan outbreak stretches medical resources, tests the country’s ability to contain infections and strains the economy.

Some parts of China are already feeling the crunch as they scramble to test local populations and quarantine the infected under China’s strict Covid-19 playbook, despite relatively low caseloads by global standards.

In the northeastern province of Jilin, the hardest-hit region in the current outbreak, affected cities are racing to prepare temporary hospitals. A local official said on Tuesday the province’s epidemic prevention supplies will run dry in two to three days.

 

Congestion Building Up

While China’s main ports remain open and vessels are continuing to dock, congestion is building up and some container ships are re-routing to avoid expected delays, according to ship owners, analysts and supply chain managers.

Charter rates are expected to ramp up, while delays to shipping freight grow longer, they said.

Container loading is “decreasing massively” at Shenzhen’s Yantian port, the world’s fourth largest container terminal, as port workers, truckers and factory workers stayed at home, said Jasmine Wall, Asia-Pacific manager at SEKO Logistics.

“This implies that it will become difficult to get cargo to and from the ports and hence whether the terminals are open or not becomes a moot point,” Lars Jensen, CEO at Vespucci Maritime, a container shipping advisor, said.

“It will have a disruptive impact on the supply chain – in turn prolonging the current supply chain crisis.”

 

Dozens of Vessels Waiting to Dock

Currently there are 34 vessels off Shenzhen waiting to dock, compared with an average of seven a year ago, according to Refinitiv ship tracking data. At Qingdao, about 30 vessels are waiting to dock compared with an average of seven last year.

Charter rates per 40-foot container remain close to all-time highs across major global shipping routes, trading at around $16,000 on the China-US West Coast route and nearly $13,000 from China to Europe, according to Freightos shipping index.

In other developments, Apple supplier Foxconn said on Wednesday it restarted some production and operations at its campus in the southern Chinese city of Shenzhen after meeting government conditions for staff to live and work in a bubble.

The company had on Monday, along with many other companies, announced production stoppages to comply with pandemic measures.

US electric vehicle giant Tesla is suspending production at its Shanghai factory for two days from Wednesday, according to a notice sent internally and to suppliers.

 

  • Reuters, with additional editing by George Russell

 

 

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.