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.

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Shanghai's zero-COVID lockdown continues.Zero-COVID policies seem effective only in creating widespread supply chain disruptions.

Shanghai's zero-COVID lockdown continues.

The hairball snarling the flow of trade in Shanghai is growing. 

Just as I warned on March 24, this lockdown will have a significant impact. The longer the delays, the greater the impact on U.S. inventories in the coming weeks. We have seen this horror show before and we all know the containers that are currently piling up will eventually make their way to the United States, creating massive congestion. 

Besides technology products, furniture and auto parts, there are seasonal items in these containers. American Apparel and Footwear Association CEO Stephen Lamar tells American Shipper this is the traditional time when U.S. retailers import their summer merchandise. 

While some retailers may have started bringing in summer items earlier this year after last summer’s congestion, the delays happening now will only hinder the supply chain.

“With more than two years of managing COVID-19 while keeping operations open in the U.S., we are eager to see the Chinese deploy these learnings as well,” Lamar says. “Zero-COVID policies seem effective only in creating supply chain disruptions that extend far beyond China’s borders. 

“We need healthy supply chains and healthy trading relationships now more than ever.”

SONAR tracking

SONAR tracking of the inbound ocean volume of twenty-foot equivalent units shows how the combination of Lunar New Year and lockdowns have had an impact. 

Project44 breaks down the container crunch. The length of time of containers dwelling is increasing as a result of the lack of manpower.

The continued dramatic drop in shipments from Shanghai specifically just shows ports declared “open,” yet trucks and warehouses still need to be operational to move trade. With 90% of trucking capacity sidelined, according to Seko Logistics’ latest update to customers, what would you expect?

American Shipper pulled the bills of lading from February to last Wednesday to see what types of summer items have arrived from Shanghai. Pools for Walmart, infrared saunas, camping gear like sleeping bags and tents, patio furniture, bicycles, and even golf carts have been moved by ocean freight.

“The ongoing COVID-19 lockdown issues in China continue to create additional supply chain disruption for U.S. retailers,” says Jon Gold, vice president of supply chain and customs policy for the National Retail Association. “The impact is being felt across the supply chain from factories to ports. 

“Ongoing challenges include factories struggling to get materials needed for production, difficulty moving products to the ports in part because of the driver shortage, as well as increased consumer demand. While the impact of the Shanghai lockdown is limited right now, it will grow the longer the restrictions are in place.”

Now the zero-COVID measures are extending to manufacturing hub Guangzhou. These lockdown contagions may be hailed as a “cure” in China at combating the virus; unfortunately, they’re also  destroying the health of the global supply chain.

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Shanghai’s 2-stage COVID lockdown may make getting containers ‘almost impossible’

“This will limit the capability of factories to deliver containers to the ports,” said one industry consultant.

Logistics managers are warning clients the two-stage lockdown in Shanghai could be worse than the initial COVID lockdowns.

“These lockdowns are possibly more severe than the initial quarantines in 2020 when COVID was first discovered,” Jon Monroe of Monroe Consulting told American Shipper. “Many people will tell you the ports are open. And this is true. But the port workers, factory workers and truck drivers are locked in their homes.

“This will limit the capability of factories to deliver containers to the ports. It may be almost impossible to get containers to Yangshan and Waigaoqiao.”

These are the latest COVID measures deployed by the government after two weeks of targeted temporary lockdowns failed to contain the breakouts.

The first phase applies to the eastern part of Shanghai and will run from Monday to Friday. The financial center is located in this part of the city. 

Shanghai’s western part is the second phase, with the lockdown running Friday to the following Tuesday afternoon (April 5). 

C.H. Robinson’s client advisory stated: “Offices and all businesses not considered essential will be closed and public transport suspended, creating major shortages on manpower and trucking availability. Our team in Shanghai are all working from home diligently for the time being and will continue to assess all areas of operation.”

The 3PL provider also provided some specifics in its advisory.

Meanwhile, Seko Logistics sent an alert to clients Sunday afternoon, warning of additional lockdowns.

Brian Bourke, Seko’s chief growth officer, told American Shipper, “This may be a significant impact to importers for all transportation modes, and we’re monitoring the situation with further updates from our team in China.” 

A Worldwide Logistics email to clients explained that the surge in COVID testing in Shanghai is delaying the usual 12-hour response time — and thus slowing the ability of drivers who must have a clear test result in order to drive. 

“Container movement between Shanghai and nearby industrial areas in Jiangsu province are restricted,” the email noted. “The situation is still developing. No reopening schedule has been announced yet. Carriers are shifting more allocation to Ningbo port or the river ports on Yangtze River to fill up the ship.”

Manpower is key to a port functioning efficiently. Without drayage, warehouses and factories running smoothly, port productivity suffers.

Using ImportGenius, American Shipper searched the bills of lading out of Shanghai. The breadth of products is large and also summer-related — from Dollar General products like beach towels, swim vests and garden tools, to Walmart goods such as pool products for the spring season. Other household items like Duracell batteries, Bissell vacuums, vinyl flooring, Ikea furniture and auto parts all leave out of that port.

“Some freight normally routed via Shanghai is now moving to Ningbo,” explained Alan Baer, CEO of OL-USA.

The drop containers out of Shanghai can clearly be tracked by SONAR  in the past seven days.

The COVID containment measures are not curtailing the spread. Worldwide also stressed Qingdao is still seeing a 30% drop of trucking power and “the whole city transportation process is slowing down.”

The city of Tianjin’s COVID situation is described by the logistics company as “severe … t. Container movement around Cangzhou/Langfang/Bazhou/Tangshan are seriously restricted and waiting for further notice, most factories around these areas are locked down.”

China’s lockdown will impact more than electronics from Yantian, Shanghai

“50% of our ocean freight out of these two ports are non-electronic products,” explained Terry Unrein, COO of the Americas for Seko Logistics.

The ports of Shanghai and Yantian are known as two of the largest electronics export hubs in the world, but if you look in the containers, you will find much more than that. 

Using ImportGenius, American Shipper analyzed the bills of lading of Chinese exports leaving those ports bound for the United States since Feb. 1 to see what variety of items are manufactured and exported from those specific regions.

In addition to televisions and other electronic goods, the 5,958 containers processed — 3,006 originating in Shanghai; 2,952 in Yantian — were filled with everything from Tempur-Pedic electric mattresses, home and office furniture, batteries, toys, firepits, and clothing to Christmas trees, flooring, lighting, truck and auto parts, home decor, and even Amazon chassis. 

Importers listed on the bills of lading ranged from the nation’s largest retailers and Amazon third-party sellers to 3PLs transporting products on behalf of companies like Home Depot, Lowe’s and Restoration Hardware.

“50% of our ocean freight out of these two ports are non-electronic products,” explained Terry Unrein, COO of the Americas for Seko Logistics. “The products exported out of these ports are important for the entire U.S. supply chain.”

This snapshot compiled by the bills of lading research provides some much-needed insight into just how many sectors of product originate out of those two ports, which are currently being impacted by China’s zero-COVID lockdown.

Lifesaving medical devices are also made in the Shenzhen and Shanghai regions and are exported from Yantian and Shanghai. A total of 23,824 cartons of medical devices and products were exported out of the Port of Yantian during the time frame analyzed. From the Port of Shanghai, 89,315 packages of medical products were exported.

“This issue isn’t going away. Our members have reported persistent delays, as the backlog of medical supply containers awaiting delivery has increased by 13% since January,” explained Matt Rowan of Health Industry Distributors Association. “Approximately 9,000 to 14,000 containers are currently delayed.”

The closure of the factories in these regions and the zero-COVID restrictions and quarantines were a subject of concern at the Port of Los Angeles’ recent monthly press conference.

“South China business is important to us. It represents a third of our cargo,” explained Gene Seroka, executive director of the Port of Los Angeles. “ The severity of the impact is based on how bad the outbreak is and how long the closure would be.

‘You need to keep in mind the impact of these factory closures will not be felt immediately but for weeks to come. We have to watch the recovery and how quickly they [the Chinese factories] can pick up on orders and ongoing orders.”

So while Apple and smart-TV brands are making the COVID-impact headlines, it’s apparent that lots of other items in your household besides the ones you have to plug in or charge may have originated from one of those ports.