Is Shanghai blocking the world trade?
On Monday, some Shanghai residents stepped out for the first time in over two weeks as the city took the first moves toward easing the Covid-19 lockdown.
Despite the limited reopening, the shipping backlog is unlikely to be alleviated.
Shanghai Port lacks space for refrigerated containers. Sea shipping companies are rerouting cargo for intermediate storage until the blockade is eased. Dangerous goods are also transferred to other ports for unloading.
Truck drivers entering locations as Shanghai ports, airports and factories must have a negative COVID 19 test within the last 24 hours. As the country struggles to process millions of tests at once, the requirement has created a logistic nightmare for moving goods.
In China, trucks dominate local transportation, carrying about three-quarters of all cargo. Limited truck availability caused prices to have more than tripled this year. The supply chain is disrupted due to the lack of trucking capacity.
Exports are proceeding relatively smoothly, but imports have stopped because truck drivers cannot simply enter or leave the port. The dwell time of imported containers at Shanghai Port reached 8 days, an increase of 74% from March 28.
Nanjing is the latest port to report an outbreak of Covid, and many of the port's operations along the Yangtze River have been closed. The Yangtze River traffic was already suffering from a shortage of pilots.
Carriers, including Maersk and ONE, have begun canceling calls in Shanghai instead to provide multimodal transport services such as land to water and rail. Some shipping companies have reduced efficiency by 30% due to a lack of trucking at the port.
Shippers are trying to reroute cargo from Shanghai via Ningbo, especially in Jiangsu, Anhui and Sichuan. At the same time, more Covid19 cases have been detected in Ningbo. Beilun is full due to traffic congestion in Ningbo due to the blockade of Shanghai. Space is tight and there is a shortage of 40ft and 40HC equipment
On Tuesday, Apple supplier Pegatron announced that it had stopped production at both its Shanghai and Kunshan plants due to COVID19 restrictions.
No one knows exactly when the blockade will end. There is growing concern that the blockade in Shanghai is just the beginning of the many-month challenge. The resulting supply bottlenecks can increase commodity prices by an additional 4% to 5%. China's congestion and increased dwell times pose a threat to the recovery of Los Angeles. At the same time, if authorities can contain and unblock this month's outbreak, the logistic backlog could be addressed in about a quarter.
