Shanghai lockdown is not causing global supply chain chaos (yet)

Shanghai lockdownThe Shanghai lockdown isn’t following the same supply chain script as the big Chinese disruptions of 2020 and 2021.

Shanghai lockdown

First came China’s Wuhan lockdown in February 2020. Then came the closing of Yantian in Shenzhen, the world’s fourth-largest port, in June 2021. Now, Shanghai — site of the world’s largest port — is in extended lockdown. The first two events had extreme effects on container shipping to the U.S. But Shanghai is no Wuhan or Yantian, at least not yet.

Shanghai export box wait times

One fear is that China’s strict COVID policy will lead to a pileup of containers at Shanghai’s port. The big difference this time around is that Shanghai’s port remains in operation.

Waiting times for containers in Shanghai terminals awaiting export as well as import containers unloaded from ships are tracked by project 44.

Waiting time for export containers, including those headed for the U.S., has actually decreased during the lockdown period: from 3.1 days on March 28 to 2.1 days on Monday. “This improvement is because fewer containers are getting to the port in the first place, while simultaneously, sufficient vessel capacity is available to handle those export containers,” said project44.

The weekly average wait time for export containers in the week ending Sunday was three days. In contrast, when Yantian shut down last June, weekly average export container wait times in that port spiked to 25 days.

Shanghai wait times
Blue line = Shanghai wait time, orange line = Yantian wait time. Chart: FreightWaves SONAR (To learn more about FreightWaves SONAR, click here.)

Shanghai import box wait times

Shanghai has seen an increase in wait times for import containers, although not as much as some might expect.

According to project44, Shanghai import container wait time has jumped 163% from 4.6 days on March 28 to 12.1 days on Monday. “Due to reduced truck transport in and out of the port following COVID testing restrictions, containers arriving at Shanghai must wait for over a week before they are picked up and taken to inland destinations,” said project44.

However, to put the recent rise in broader context, the average wait time during the week ending Sunday was 8.5 days, less than two days more than wait times during the recent Lunar New Year holiday, and well below the weekly averages during the initial COVID lockdowns. Current wait times in Shanghai are also far below many previous wait time spikes seen in Yantian.

Shanghai wait times
Blue line = Shanghai wait time, orange line = Yantian wait time. Chart: FreightWaves SONAR (To learn more about FreightWaves SONAR, click here.)

Shanghai/Ningbo port congestion

Another fear is that the COVID lockdown in Shanghai will cause an enormous number of container ships to pile up at anchorages off China. It hasn’t happened yet. “No significant vessel congestion has been recorded at the Port of Shanghai,” said project44.

Data provider eeSea tracks container-ship port congestion levels. It uses ship-positioning data to calculate a congestion ratio: ships waiting offshore for berths as a percentage of the total number of ships at berths and waiting. The latest data from eeSea does show a rise in container ships waiting off Shanghai and neighboring Ningbo-Zhoushan (the world’s third-largest port), but not to an exceptional degree.

During the week of Feb. 28, when the lockdown began, ships off Shanghai represented 16% of the total either waiting or at berths. The ratio is now up to 47%. At Ningbo, the ratio has risen from 49% to 71% over the same period.

Chart: American Shipper based on data provided by eeSea

However, the congestion ratio was at these same levels both in July and September 2021. Simon Sundboell, founder of eeSea, told American Shipper, “It has gone up, but to me, the story is that it still isn’t dramatic in a historical context.”

The number of ships waiting off Shanghai and Ningbo is actually below where it was last September. There are currently 115 container ships waiting off the two ports, according to eeSea. On Sept. 24, 2021, there were 34% more: 154 ships.

And the number of ships at Shanghai’s berths has fallen since the lockdown began. According to project44, “The number of vessels berthed at Shanghai has dropped by about half, from around 30 daily to only 14 on April 17. This indicates that fewer vessels are attempting to call at Shanghai in response to the reduced truck traffic permitted to enter the port facilities.”

Asia-West Coast blank sailings

Yet another fear is that ocean carriers will “blank” (cancel) sailings in response to disruptions in Shanghai. Blankings would negatively impact service to the U.S.

So far, it looks like carriers are skipping some Shanghai calls — which explains why congestion isn’t higher and why ships at berth are lower — but not canceling more sailings. Sea-Intelligence sees no effect yet on the number of blankings.

Sea-Intelligence compared current blank sailings to those at the time of the Yantian port shutdown last year, looking at blank sailings both before and after disruptions began. According to Sea-Intelligence CEO Alan Murphy, “The number of blank sailings [at the time of the Shanghai lockdown] was coming down from a more elevated level, whereas in the Yantian case in 2021, blank sailings increased as a consequence of the COVID impact.”

Chart: Sea-Intelligence

“Even though the level of blank sailings right now basically matches the number seen in 2021 following the Yantian [shutdown], it cannot be concluded that the impact on the market is the same.

“Quite the contrary,” said Murphy. “There has not been any material impact on blank sailings, beyond the normal state of affairs, to the degree that the market prior to the Shanghai lockdown can be called ‘normal.’”

What’s next?

Just because the Shanghai lockdown hasn’t thrown supply chains into chaos doesn’t mean it won’t in the future. It may be just too early to see the ultimate consequences. Wait times, congestion and blank sailings could spiral up from here. As consultant Jon Monroe previously told American Shipper, “It’s probably worse than Wuhan.” 

Murphy cautioned: “We could still be in an early phase of the Shanghai lockdown, and if the factory closings persist, it is highly likely that the number of blank sailings will begin to increase in the coming weeks.”

During an online presentation on Thursday, Flexport Ocean Strategy Director Kyle Beaulieu warned: “There’s a lot of cargo stuck at warehouses that wasn’t able to depart due to the abruptness of the shutdown. And we’ve seen lots of overdue POs [purchase orders].

“In similar situations at other ports, we’ve seen a post-lockdown surge in bookings. If Shanghai has a huge surge it will definitely affect the market,” he said, pointing out that such a surge would likely coincide with pulled-forward holiday bookings.

There’s also a less ominous scenario. “We’ve seen the port continue to operate. That’s better than what we saw at Yantian, when the port had to totally shut down. The difference between what’s happening in Shanghai and other lockdowns is that Shanghai has been able to load some cargo,” said Beaulieu.

“Factories are still producing outside of the [lockdown] zone and are able to load depending on the trucking situation. So, hopefully, if there is a surge, it won’t be as bad as the ones we’ve seen previously.”

In other words, post-lockdown may not be like a dam bursting this time, as it was after Wuhan and Yantian. It might be more like a faucet that’s temporarily turned down to a lower flow, then turned back up again.

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