Viewpoint: Shanghai’s reopening pledge nothing more than the boy who cried wolf

COVID workers in Shanghai.When it comes to lifting lockdowns in China, false hope will remain the norm.

COVID workers in Shanghai.

Another week — and another pledge that the lockdown in Shanghai may be lifted. It’s not the first time this has been announced. 

And it won’t be the last.

The city’s vice mayor, Wu Qing, said at a news conference Thursday that there would be an “orderly opening, limited [population] flow and differentiated management.” Yet, no date has been set.

How many times do these false alarms have to be stated? “Actions speak louder than words” applies to this situation. The government’s actions are not reflecting the rhetoric that officials are putting out.

Anyone who has been reading the logistics reports knows the truth. The message is simple: The Chinese government, not the local level, is in control of the flow of manufacturing and trade.

Crane Worldwide Logistics informed clients in its Thursday  update: “For export, we still need to check with suppliers whether their local government allows container drayage or trucking service with truck drivers from Shanghai; or whether they can send cargo to our warehouse in Shanghai. We need to coordinate with the consignee for the document turnover and delivery schedule case by case for import.”

Worldwide Logistics offered a wide breakout on the “zero-COVID” status and impacts across the country to customers.

“We can see the Shanghai pandemic situation is trending towards a good prospect steadily,” the company said. “However, in some areas like Tai cang, Zhang jia gang and Chang shu, the COVID cases figure is rebounding, which causes the problem of cross-city delivery and containers stuffing. It should still take some time for the cross-city transportation to recover to the normal. The whole market is still impacted by the COVID situation, and the recovery depends on when the pandemic situation can be totally controlled in the country.’

(Courtesy of Worldwide Logistics)

Seko Logistics informed clients on Friday, “Trucking in and out of Shanghai requires a traffic permit, which is only valid for 24 hours and only on specific routes. Even with this arranged, it is possible for booked trucks to be commandeered by the government to transport aid supplies.”

This comment after China saying it has increased the list of companies that can reopen under a “closed loop system “ to 2000. The lack of ability for trucks to deliver raw materials into these “closed  loop” companies has impacted companies like Tesla, which had to stop production.

Now the government is trying to help.

The insanity of this situation has created a dense fog, making the logistics planning picture beyond murky. The obstruction created by Shanghai has gummed up vessel schedules.  

American Shipper reviewed a booking confirmation from Oakland, California, to Great Britain where the booking was on its 60th update. The estimated delivery went from late May to late June.

Once the roads are truly open and products can be completed and transported, a flood of containers is expected to arrive in the United States, at least a month or two after a real opening.

“Right now, the Trans Pacific Eastbound market reminds one of being in the eye of a hurricane,” said Alan Baer, CEO of OL USA. “Blue sky, available space and moderation of pricing.  However, soon enough the 100 miles per hour wind and rain could be battering supply chains all over again.”

No slicker or umbrella will protect the fragile U.S. logistics system when this container storm hits. The problems plaguing the Port of  LA and Long Beach are still there, no matter what messaging we hear from the Biden administration on improvements. 

The dwell time of the containers, and the continued long line of vessels waiting for berth, are a physical reminder of the inefficiencies.

More from Lori Ann LaRocco

SONAR charts check temperature of Shanghai’s ailing supply chain

What can go wrong next in China? Now there’s a lockdown in Zhengzhou

Viewpoint: China COVID policies to squeeze flow of European exports to North America

Containers in Shanghai.China’s zero-COVID measures will make it harder for European exports to reach the East Coast because empty containers aren’t getting where they’re needed.

Containers in Shanghai.

China’s zero-COVID measures are producing another problem in trade. Logistics providers in Europe told American Shipper they are concerned about an impending empty-container-supply crisis. A bitter combination of blank sailings and an increase in delays of Europe-bound shipments from China have created a cocktail of capacity constriction.

“You need imports to have containers for exports,” said Alexander Geisler, managing director, German Shipbrokers’ Association (ZVDS). “The whole system only works when you can put a container six to seven times on a ship in a year. Therefore, you have to reduce the dwell time in the ports and at the inland terminals.”

The drop in twenty-foot equivalent units from Europe to the U.S. East Coast can clearly be tracked.

‘A lack of empties’

As a result of the decrease in TEU capacity from the Far East to Europe, logistics companies have fewer containers for clients to fill their products bound for the East Coast.

“Vessels are slowing Asia and there is a lack of empties,” explained Anne Brouwer, director of operations at TOC Logistics. “We are very concerned about the impact on availability of empty containers for European exports to North America’s East Coast.”

 Project44 details the delays in shipments from China to Europe.

“Although the Port of Shanghai has remained open throughout the lockdown, leading to very little port congestion, the shuttering of China’s manufacturers means that export shipment delays will persist for weeks, if not months, to come,” said Josh Brazil, SVP of supply chain insights for project44.

Alan Baer, president of OL USA, said his Hamburg, Germany, office pinpointed the container shortage leading to canceled bookings out of Europe.

“All the capacity is booked, no matter what the rate is,” Baer said. “I have been told there are approximately 60,000 TEUs waiting on 10 large vessels off of Hamburg. They say you cannot book for June because it is too early. But if you book for the end of May, there is a possibility of being rolled to June. I am told this is the craziest time they have ever seen.”

Waiting for the cork to pop

With testing expanding to the largest district in Beijing and COVID cases increasing there, the immediate future offers few positives. Dozens of buildings are already under lockdown; if more are added to that list, logistical restrictions are likely to follow.

“Until the ‘zero-COVID’ cork is popped, the logistics picture will continue to be cloudy,” said Richard Strong, director of account management at TOC Logistics.

The pressure of that cork inhibiting the free flow of trade in Shanghai is building at other ports, which will further impact the Europe-to-U.S. trade. The flood of canceled sailings to Shanghai and the rerouting of trade to Ningbo are creating delays.

“An increasing number of blank (or canceled) sailings and/or an increase in delays in Chinese ports in particular will undoubtedly result in a reduction in the number of boxes being moved into Europe for discharge, and therefore down the line the European export to NAM (and other areas as well) will have a deficit in available empty containers,” explained Niels Madsen, vice president of product and operations at Sea-Intelligence ApS.

“This may however be both good and bad for North America, since less containers from Europe may assist to ease up the congestion currently experienced in North American East Coast ports, which will assist US importers in receiving congested cargo faster. On the downside, less containers in import from Europe may then have the effect of less empty containers available for North American East Coast exporters. But that is a couple of months down the line.”

This inevitable container restriction will not only hit European exports but fuel the flames of inflation as the price of these coveted boxes will only go up.

Chinese lockdowns will create shocks to American supply chains (but China is the biggest loser)

Shanghai's zero-COVID lockdown continues.FreightWaves Founder and CEO Craig Fuller analyzes the impact of the latest Chinese lockdowns on the supply chains between China and the U.S.

Shanghai's zero-COVID lockdown continues.

What happens in China doesn’t stay in China. And for American supply chains, that is usually a good thing. American businesses have become dependent on low-cost goods coming from Chinese suppliers. But in a post-COVID world that may be entering the Second Cold War, reliance on China means that American businesses are held hostage by an autocratic regime that seems oblivious to the damage it is doing to its own economy, much less the global one. 

Since the earliest days of COVID-19, China has practiced a zero-tolerance policy to prevent COVID from spreading amongst its population. After the initial onslaught of cases around Wuhan and pockets throughout China, the government declared victory and boasted about its superior method of containment compared to Western democracies. 

Image of U.S. and Chinese flags, with a rupture between them indicating conflict.
U.S.-China relations have become very tense in recent years as China flexes its new economic muscle in other arenas.
(Image: Shutterstock)

This draconian approach had merits in the earliest days, when the risks of the virus were unknown and there was a lack of understanding of how the virus spread. Two years later and billions of doses of vaccines that have allowed Western countries to open back up, a lockdown of any sort seems impractical and an aggressive overreach. 

But China has locked down two of its three largest cities: Shanghai, a global financial center and the Chinese equivalent of New York City; and Guangzhou, a massive manufacturing and distribution city. Both are home to some of the world’s largest ports – Shanghai’s port is the largest in the world and Guangzhou is the fourth-largest. Combined, the two port cities handle nearly three times the amount of cargo that the entire U.S. imports each year.

Lockdowns Chinese-style

The Chinese version of lockdowns are far more oppressive than the most extreme Western version. In China, if you are subject to a lockdown, you can be forbidden from leaving your home for anything. No groceries, no food – absolutely nothing. 

Medical staff in white hazmat suits on the streets of Shanghai. A mass quarantine has made it very difficult for trucks to get through the city.
Medical workers in hazmat suits on the streets of Shanghai, China. (Photo: Shutterstock/Robert Wray)

There are even reports that if you do become sick, you must suffer alone without medical care, no matter how dire your condition is. Basically, Chinese people are completely barricaded and held prisoners in their own home. If you leave, you are subject to arrest and the most egregious penalties that only an authoritarian regime can impose. 

And since the diet of most Chinese is far less dependent on processed foods than the American version, the food supply chain is far more vulnerable to disruptions. The Chinese eat far more fresh produce and meat than Americans and lack the cold chain network that is the backbone of the American grocery system. The Chinese get the majority of their meat and produce at wet markets, which are incredibly vulnerable to supply disruptions. 

The other feature of the Chinese lockdowns is that they cripple entire industries. The Chinese government won’t allow workers or truck drivers to move throughout the affected areas. Therefore, the Chinese lockdowns prevent people from getting to work in factories and goods from being hauled from the factories to the ports. Put simply, any city subject to a lockdown is nearly offline. 

The lockdowns in Shanghai began on April 2, and the Guangzhou lockdowns began on April 11. According to a report in Reuters, at least 373 million people – who contribute 40% of China’s GDP – have been affected. This is roughly the equivalent of removing the combined economies of Japan and Mexico from the global economy.

There will be a surge of containers from China when it restarts its economy, but no one knows when this will happen, how long it will take, and how backed up the domestic supply chains are. For now, we know the freight market is slowing and China is only making things worse.

Container volumes out of China have dropped 31% since April 6th

FreightWaves estimates that Chinese imports currently represent at least 16% of all U.S. trucking volumes. 

According to SONAR, container volumes out of Chinese ports began to drop on April 6th and as of April 15th, have declined by more than 31%. This slowdown in volume will impact the U.S. surface freight market as less volume of cargo enters U.S. trucking and intermodal networks.   

The longer China stays offline, the greater the impact to U.S. supply chains.  In addition to throttling Chinese production, lockdowns may harm U.S. domestic production and distribution. Inventories are at record highs, but they could burn off quickly, just as they did in 2020.

The bigger question is how screwed up China’s domestic supply chain will be. Factories in China depend on upstream producers, many located near the factories they serve and subject to the same lockdowns. 

We also don’t know the situation for raw materials coming into the country.

Freight networks are bidirectional, meaning that the ships waiting off the coasts of China contain some raw materials that are used in factory production. There are an estimated 300 containerships and 500 bulk ships off the coast of China, loaded with cargoes of everything from machinery parts,  components to metal ore to grain. The commodities that are on these ships are used for domestic consumption, but also play a vital role in Chinese manufacturing supply chains. 

How long will it take to offload and transport these raw materials? No one knows. And since China is opaque, we don’t have good data on the situation on the ground. The longer China remains in lockdown, the longer it will probably take to resume normal production cycles.

There are also a large number of empty containers bound for Chinese factories that are waiting for Chinese truckers to move them inland. Without the flow of empties, Chinese upstream factories can’t ship products to downstream manufacturers or for export. 

The big difference between this lockdown and the one in February 2020 is that the rest of the world is open and won’t be tolerant of disruptions. Consumers won’t wait for products – especially when it comes to items that fall under discretionary spending. If products are delayed, consumers will just purchase alternative goods or nothing at all. 

Yangshan, Shanghai China (Photo: (Shutterstock/Weiming Xie)
Yangshan, Shanghai China (Photo: (Shutterstock/Weiming Xie)

There will be demand destruction.

Eventually, all of the pent-up orders will be shipped. If the process for ramping up shipping volumes happens quickly, then American ports will likely see a replay of last year’s shipping influx and backlog.

However, if the process takes longer, it could be worse for the economy, because it would erode supply chain forecasts and product orchestration. This will have long-lasting impacts for decades to come.

Supply chain professionals are already looking for alternatives to China, and this process will accelerate. FreightWaves is seeing a surge in site selection freight modeling requests from supply chain organizations that want to move production closer.

Cost is only one consideration in choosing a production site. Dependability is often more important.

The cynics say North American reshoring will never happen due to cost. This was true for decades. But boardrooms are now prioritizing supply chains in ways they never have before. 

COVID has disrupted global supply chains. (Photo: Jim Allen/FreightWaves)
COVID has disrupted global supply chains. (Photo: Jim Allen/FreightWaves)

Supply chain considerations have been elevated to strategic importance and leaders in supply chain organizations are gaining influence on corporate decision-making. 

Lower carbon emissions, higher dependability, and shorter lead times mean that near- or on-shoring is more favorable now than widely dispersed global supply chains. It won’t happen overnight and not every industry will shift back, but it is happening and the most recent lockdowns are only going to accelerate this movement. 

Interested in more data? 

All of the data in this article is available through FreightWaves’ proprietary SONAR platform. SONAR is the world’s deepest and freshest supply chain intelligence platform. To learn more, sign up for a demo at: https://sonar.freightwaves.com/

Get ready for the next supply chain shockwave

Container stacks at the Port of Shanghai. A COVID lockdown is creating huge logistical challenges in the city.A torrent of backlogged cargo in China is expected to overwhelm global ports once Chinese authorities end widespread COVID lockdowns.

Container stacks at the Port of Shanghai. A COVID lockdown is creating huge logistical challenges in the city.

Concern is growing that the spread of COVID cases and city lockdowns in China will have massive downstream effects for global supply chains that could dwarf previous disruptions since the start of the pandemic.

Last May, the huge Yantian container terminal at the Port of Shenzhen throttled down to 30% of normal productivity for a month to stamp out a handful of positive cases there. Hundreds of thousands of shipments that couldn’t enter the port accumulated in factories and warehouses, and many vessels skipped the port to avoid waiting seven days or more at anchor. It took weeks after the port reopened to clear the cargo backlog. The effects cascaded to the U.S. and Europe, resulting in port traffic jams, transit times triple the norm and missed retail deliveries for the holidays.

The difference this time is that an entire metropolis — and highly interconnected global trade center — is essentially shut down. Not since the initial 2020 COVID-19 outbreak in Wuhan have lockdowns been this extensive in China.

“It’s probably worse than Wuhan,” said Jon Monroe, an ocean shipping and supply chain expert who runs a consulting firm. “You’re going to have a lot of pent-up orders. It’s going to be an overwhelming movement of goods” that will drown shipping lines and ports once the lockdowns are lifted.

Lockdown damage

Twenty-five million people in Shanghai have been sequestered for 18 days. Chinese authorities this week slightly eased the restrictions, dividing the city into three categories based on previous screenings and risk levels. People can exit their community but are encouraged to stay home in “precautionary” neighborhoods with no positive COVID-19 cases in the past two weeks. Residents of “controlled” neighborhoods are to self-monitor their health for a week, can move around within their neighborhood and pick up online delivery orders from designated areas. Lockdown areas are where positive cases have been reported in the past week.

Spanish financial services firm BBVA predicts Chinese authorities will stick to the “zero-COVID” strategy and lockdowns until at least June. Other China observers say it could take even longer to meet China’s infection standard.

Shanghai is one of the largest manufacturing centers in China, with heavy concentrations of automotive and electronics suppliers. It is home to the largest container port in the world and a major airport that serves inbound and outbound air cargo. Exports produced in Shanghai account for 7.2% of China’s total volume and about 20% of China’s export container throughput moves through the port there, according to the BBVA report. 

Most warehouses and plants are closed, nine out of 10 trucks are sidelined, the port and airport have limited function, shipping units are stranded in the wrong places, and freight is piling up. 

More and more, the logistics impacts are rippling beyond the contagion epicenter. 

Shanghai Ocean Export Volume to U.S.

Export containers that were already at the Port of Shanghai when the lockdown started are making it onto vessels, but most goods booked on outbound vessels are stranded at warehouses because shuttle trucks can’t make pickups or deliveries.

Truckers require special permits, which are only good for 24 hours, as well as negative COVID tests to get in and out of the city or enter certain zones, according to logistics providers. Checking COVID certificates has led to huge traffic jams at the port.

The French logistics provider Geodis reports that truck drivers in the Shanghai area are being forced to wait up to 40 hours at certain highway entrances. Trucking rates have soared because of the limited supply, and shippers are waiting three to five days for cargo to get picked up, according to San Francisco-based Flexport.

Reduced manufacturing output, along with limited truck access to the port and airport, are causing a significant drop in air and ocean export volumes. Less demand is translating to lower freight rates.

In response to the lack of labor and cargo, air carriers have announced widespread cancellations, and some ocean carriers are skipping Shanghai port calls.

Several shipping lines have also begun offloading refrigerated containers at other ports along their voyage because the storage area with electric plugs is too crowded in Shanghai. Customers face extra port fees and delays routing the cargo to its intended destination. Maersk, the second-largest container vessel operator, said Thursday it has stopped accepting bookings to Shanghai for refrigerated cargo, some types of gas and flammable liquids.

More omissions are expected and liner companies may temporarily idle vessels or cancel some outbound Asia sailings altogether, according to Crane Worldwide Logistics and other service providers.

Asia-U.S. East Coast rates have fallen 7% since the outbreaks in March, said freight booking site Freightos, which also publishes an ocean rate index.

“But even if the lockdown persists and demand drops significantly, ocean carriers will likely reduce capacity which could keep rates from plummeting, just as they were able to do in the first few months of the pandemic when ocean volumes fell significantly but transpacific rates declined by less than 15% and were about level year on year,” it said.

At Shanghai Pudong airport, ground handling companies are operating with skeleton staff. 

Shanghai Eastern Airlines Logistics, a cargo terminal operator, ceased bulk loading of containers after a positive COVID case, which will further slow cargo processing, said Dimerco, a Taiwan-based freight forwarder. Airlines report that Pactl, which operates three other cargo terminals, has suspended acceptance of dangerous goods and temperature-controlled cargo because the warehouse is full.

Flexport said in a market update that 80% of commercial freighter services have been canceled and airlines are considering shifting operations to nearby airports. Qatar Airways announced that freighter flights will remain canceled until next Thursday, saying “the latest COVID-19 restrictions announced by local authorities limit our ability to operate flights in and out of Shanghai with sufficient cargo loads.”

Freight forwarders have been rerouting cargo to alternative airports such as Zhengzhou, Xiamen, Shenzhen and Beijing, as well as the Port of Ningbo, but those facilities are beginning to feel congestion effects themselves. Rates to ship from those locations are increasing.

Flights at Zhengzhou Xinzheng International Airport are reduced by 50%, according to Geodis. Most inbound cargo there is transit cargo to other cities, such as Shanghai — which is compounding the backlogs because the cargo isn’t allowed to move to the final destination. That means logistics companies can only clear shipments that customers can pick up in Zhengzhou. 

Many intermediate components used by manufacturers in the area are imported through Shanghai, which could lead to production delays if the port remains clogged and companies run out of inventory.

Everstream Analytics, which helps companies manage supply chain risk, predicts U.S. and Canadian automotive assembly plants will quickly face delays and disruptions because the lockdowns will affect shipping of parts such as seats, tires, engines, bodies and brakes. 

Shipping schedules in South China are being impacted by irregular feeder vessels and large barge services, creating delays for transoceanic vessels at the ports of Hong Kong and Yantian, according to a situational update from supply chain data platform project44. Both ports have been coping with disruptive COVID restrictions for months.

Nearby manufacturing hubs in Vietnam and Cambodia are already suffering from a shortage of Chinese components for their manufacturing industries, project44 reported. And pharmaceutical companies in India, which source 70% of their active ingredients from China, are facing limited supplies. 

Ocean shipping delays from the top three Chinese ports to Hamburg, Germany, and Amsterdam had already doubled to more than 12 days during the first quarter, before the Shanghai lockdown fully materialized, according to project44 data.

Ocean freight expert Lars Jensen, CEO of Vespucci Maritime, summed up the situation on his LinkedIn page this way: “Until this situation is resolved — which appears next to impossible when matching the omicron variant with zero-tolerance — we should expect drops in export demand, port omissions and more blank sailings in the near term future as well as Shanghai-bound cargo increasingly being discharged elsewhere.”

COVID Lockdowns Multiply

Meanwhile, COVID infections are spreading beyond Shanghai, according to news reports and logistics companies. The southern manufacturing hub of Guangzhou, for example, has started mass COVID testing, introduced travel restrictions and shifted schools to online learning — steps that often portend a wider lockdown.

The city of Kunshan — an important production center for electronics near Shanghai — is closed down until April 19. Part of Taicang, another manufacturing area in Jiangsu province, is also locked down. A surge of new COVID cases is hitting the coastal cities of Dalian and Tianjin in the north, Ningbo in the east, and Xiamen and Dongguan in the south. 

The city of Ningbo ordered residents in two downtown districts to sequester at home, but so far the seaport is not affected. Nantong is on a partial lockdown until April 15. Port operations have been severely impacted, with logistics companies diverting shipments to Nanjing. Zhangiagang is also under partial lockdown until April 19, resulting in slower port operations and some factory closures. 

Ocean Container Rejection Rate from Shanghai to U.S.

Many shippers are exercising contingency plans and using alternative import/export gateways when possible, but road transport is increasingly difficult.

The outbreaks have led to a virtual ban by authorities on truck drivers from high- and medium-risk areas transporting cargo to low-risk areas. That includes transporting cargo from Shanghai and Kunshan to the Port of Ningbo. No cargo will be accepted if drivers have been to medium- or high-risk areas within the last 14 days or the factory is located in medium- or high-risk areas, said UPS Supply Chain Solutions in a customer update. 

As of Friday, Dalian, Tianjin, parts of Beijing, Shanghai, and Dongguan are all in high- and medium-risk areas.

Dimerco said in a notice that traffic control for road transportation is getting more strict and it is difficult to secure trucks to bring freight to Shanghai or alternative ports.

The slowdown in China exports should provide temporary relief to congestion-plagued U.S. ports on both coasts, as well as in Europe, but logistics experts say the breather is likely to be followed by a tsunami of deferred cargo once the lockdowns are lifted. The cargo volume will far exceed the handling capability of the ports, with containers jamming up terminals faster than they can be transferred to inland transport and pushing vessels into long queues at sea.

Delta Air LInes (NYSE: DAL) President Glen Hauenstein said on an earnings call Wednesday that once the Shanghai restrictions are lifted, the airline expects a boom in cargo bookings that more than offsets the current export lag.

A mass quarantine that lasts until June could mean the drawdown of backlogged air and ocean freight pushes into the peak shipping season, as more volume enters the system. 

“Even with air and ocean ports open, the length of the shutdown could make this iteration the most significant logistics disruption since the start of the pandemic,” Freightos said in its update.

Click here for more FreightWaves and American Shipper stories by Eric Kulisch.

RECOMMENDED READING:

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Shippers redirect Shanghai cargo to other airports amid mass quarantine

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Viewpoint: ‘Shanghai Surprise’ — and a new lockdown to worry about

Truck at Shanghai's deep-water container terminal.China’s latest move announcing a phased-in exit of the lockdowns for the eastern part of Shanghai has logistics managers warning clients about the impact it will have on truck deliveries.

Truck at Shanghai's deep-water container terminal.

Just like the Sean Penn-Madonna flop, the newest “Shanghai Surprise” is also a bomb. 

China’s latest move announcing a phased-in exit of the lockdowns for the eastern part of Shanghai has logistics managers warning clients about the impact it will have on the truck deliveries of their products to both the airport and seaport. 

With the military moving in to test millions of civilians, the government of China is showing the world “zero COVID” is a policy it is not abandoning anytime soon.

On the heels of the massive testing measures closing down Shanghai, a city just south (Zhejian Haining) has shut down temporarily, launching a Level 1 emergency response, according to the WeChat public account of Haining Release. A strict three-zone management and control of sealing, control, and prevention is underway; meanwhile, schools and businesses will be closed, and Intercity rail, buses, taxis, and long-distance passenger cars will be suspended.

Steve Lamar, CEO of the American and Apparel and Footwear Association, told American Shipper that this area is a hub for garment and apparel manufacturing.

A spokesperson for Orient Star Logistics explained that “the COVID test measures and the restrictions reduce the truck supply. Yet, the bigger issue that we are facing is the restrictions for truck drivers going to surrounding provinces for cargo pickup. The local government checks the driver’s route of the previous weeks and would reject the entry if the driver visited any alerted area.”

Logistics black hole

This lack of clarity is creating a black hole in logistics planning.

In a recent note to clients, Worldwide Logistics wrote the situation is “still developing” with no reopening schedule announced. 

“The extent to how the production and shipping plan is to be affected hinges upon how long it will take to get this outbreak under control,” the note explained. “And obviously, we expect to see Chinese exporting volume may drop by around 30% in the following weeks, which will put downward pressure on the market spot rate. More freight of all kinds of space has been released by carriers to fulfill the vessel for the time being.”

The Pudong New Area, Fengxian, Jinshan and Chongming districts as well as parts of Minhang and Songjiang districts are included in this new phase in the plan.

Crane Worldwide Logistics alerted its customers of the hesitancy of cities to allow in drayage trucks from Shanghai. The company characterized the container drayage situation as “challenging” and airfreight as “almost impossible” because of the lack of labor.

Crane wrote that “there are not enough longshoremen in the port, so the efficiency for loading and unloading has been impacted. Both Waigaoqiao Port and Yangshan Port are congested.   

“For import: Import vessels’ waiting time for berthing will be longer.   

“For export: Some ocean carriers have announced vessel delays or are omitting Shanghai calling of some vessel/voyages, and some have announced blank sailings. A lot of clients have shifted to Ningbo port. Some carriers have started to allocate more space to Ningbo, but some have not actioned so swiftly.”

One step ahead of capacity

Keith Winters, CEO of Crane Worldwide Logistics, told American Shipper that given the fluidity of the situation, agility and flexibility are necessary. 

“Different provinces may have restrictions on cargo movement, therefore our teams are communicating daily what is accessible while following the governmental guidelines set forth with current lockdown protocols,” Winters said. “Crane Worldwide has operations throughout China and our best advice is to keep communicating and stay one step ahead of your capacity needs as this situation develops further.”

Akhil Nair, VP of global carrier management and ocean strategy at Seko Logistics, also echoed the same challenges. 

“Seventy percent of the Shanghai container business originates in other areas so drivers have to enter different regions, which means testing no older than 48 hours old is required,” Nair said. “With the lockdown, offices and warehouses are closed. 

“Our  CFS (container freight station) is closed from March 30 to April 5. This is a location where exporters drop off their products so they can be added to a container. These are small components which would normally not have their own container. With the CTS closures, these exports cannot be dropped off nor containers filled.”

The impact of these lockdowns and restrictions can be tracked by the amount of capacity waiting off port limits. MarineTraffic data broke out the capacity for American Shipper.

The disruption of these restrictions can be seen in the troughs. Shanghai’s waiting off-port limits capacity is the only port on an uptrend.

It’s important to remember logistics companies need to provide a realistic picture of the environment so their clients can plan. It doesn’t line their coffers with cash if they overblow a situation or undersell. 

This line from Worldwide Logistics speaks volumes: “There is a clear signal that the whole city may be shut down if the situation doesn’t get better.”

So grab some extra popcorn — this horror movie may be the first in a double feature.


Watch: What the vessel backlog means in Shanghai


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