Shanghai Shutdowns

Shanghai Shutdowns – City Shutdown Reduces Cargo Capacity

Amid the largest covid wave since the beginning of the pandemic, China’s largest city has entered a two-stage lockdown this week that is aimed at stamping out the current outbreak in the area. Though it only started on Monday, the effects of the lockdown are already being felt within the country and globally.

Shanghai Shutdowns
Backlog at the Port of Shanghai – a port that typically handles approximately 140,000 cargo containers per day (China Supply Chain Disruption).

The New Chinese Covid Restrictions Posted

On Monday, Chinese officials announced that Shanghai would be entering a two-stage lockdown in which half of the city would be shut down from Monday to Friday, while the other half would be shut down from Friday to next Tuesday. The lockdowns are being enforced so that the government can covid test the city’s population and identify any community-transmission COVID Cases. Though the city’s positivity rates are still low compared to most other countries, China’s zero-tolerance policy on COVID has led them to take drastic measures now and in the past. This new lockdown comes after a series of neighborhood-specific lockdowns and testing that were taking place on a smaller scale over the last few weeks.

These new lockdowns include a mandatory stay-at-home order, a mandate for businesses to switch to work from home, and a complete shutdown of all public transport and ride-hailing apps. The freeze on worker mobility during the lockdowns is set to have a large impact on the global economy, and some of the effects are already being felt.

Shanghai has struggled specifically with controlling this latest surge. Residents have received a 9-day stay at home order as the city reports 3,500 positive cases as of Monday – a record number for the city. With residents required to stay at home and deliveries being left at checkpoints – this marks China’s largest covid related lockdown in the past 2 years.

The Impact – China Supply Chain Disruption

Due to the shutdowns, some factories in the area have temporarily shut down, including the Tesla factory just outside of the city, and BMW factories in Changchum. Others have continued to run, with workers being able to continue going to work inside industrial parks. Though production will likely see a slight dip due to the lockdowns, the much larger impact will be seen in shipping. Though no ports have been technically shut down due to the new restrictions, it’s still increasingly difficult to move shipments in and out of the area. With most transportation workers stuck at home in the area, carriers and forwarders have shared difficulties in finding availability with truckers, terminals, and warehouses.

The strain is also being felt in air cargo. Though both Shanghai Pudong airport and Shanghai Hongqiao city airport are technically open, the focus has been put on passenger flights with it being almost impossible for air cargo to move through the airports. Some airlines have cancelled flights out of the two airports this week, and even once the lockdowns are lifted, capacity may still be restricted as after the end of the lockdown, trucks will need a negative COVID test within 48 hours of attempting to cross provincial borders.

Going Forward

Though this lockdown may appear more stringent than the original set of restrictions, they are likely to have the same deep impact on shipping the economy at large. Due to a hopefully quick turnaround, these restrictions may create delays this week and next, but this may just give receiving ports some time to clear their own backlog before cargo starts rolling in again when the lockdowns lift. Contact us for more details.

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