Beijing has drafted more policies to aid under pressure supply chains as China struggles to handle the omicron variant of Covid-19.
Seven new Covid-19 deaths were reported in Shanghai on Tuesday, a city of 26m people which has been under lockdown for more than three weeks.
City authorities revealed the first virus deaths yesterday, with Tuesday’s fatalities bringing the total official count to just 10.
On Sunday, Shanghai officials revealed that as of April 15, only 62% of residents over 60 had been fully vaccinated, and only 38% had taken a booster jab.
Every day the lockdown in Shanghai continues will amplify the ripple effects in global container supply chains
Shanghai has carried out more than 200m PCR tests since March 10. The city, China’s largest, has been the one attracting the most headlines for its lockdown, yet it is by no means alone. By April 11, 87 of China’s 100 largest cities had imposed some form of restriction on movement, according to Gavekal Dragonomics, an independent economic research firm that has been tracking lockdowns.
The rolling lockdowns are taking a toll on the national economy. China’s economy expanded 4.8% in the first three months of this year compared to the same period last year, below Beijing’s 2022 annual target of 5.5%.
China reported on Monday its biggest decline in consumer spending and worst unemployment rate since the early months of the pandemic in March, as lockdown measures to stop Covid infections disrupted activity.
Retail sales, a crucial sign of whether consumers are spending, fell 3.5% in March from a year earlier, the National Bureau of Statistics said on Monday. Factory output grew 5%, a rate that was slower than the pace recorded in the first two months. Imports, which had been racing ahead in the first two months of the year, fell slightly last month.
The central bank in Beijing said yesterday it will step up financial support for industries, firms and people affected by Covid-19 outbreaks.
Among 23 measures announced by the People’s Bank of China (PBOC) yesterday the bank said financial institutions should actively meet financing needs of transportation and logistics firms and truck drivers, as part of steps to support logistics and supply chains. Moreover, in a likely boost for dry bulk shipowners, the PBOC stated banks should lend more to infrastructure projects, suggesting China is gearing up for some form of stimulus package, something that it has enacted when it has met other economic challenges over the past decade.
Many manufacturers in and around Shanghai are being urged to reopen their plants this week.
Beijing said last week it had drawn up a white list of 666 firms prioritised to reopen or keep Shanghai operations going. These include car manufacturers as well as semiconductor and medical firms.
Exports out of Shanghai have clearly dropped in April, and shipping lines have shifted a number of calls to Ningbo-Zhoushan to the south. Waiting times at Shanghai have increased, as the data above from South Korea’s SeaVantage shows. Liner congestion is now considerably worse at Ningbo-Zhoushan as data compiled below today by Copenhagen-based eeSea shows.
Nevertheless, there is evidence that worst might have passed. The latest weekly report from Linerlytica, published yesterday, stated that the number of ships waiting to enter Shanghai and Ningbo has reduced over the course of last week as carriers are omitting Shanghai calls due to the drop in export cargo volumes.
The issue now will be the whiplash effect ports overseas will experience as and when Shanghai does reopen, something picked up by Lars Jensen, the CEO of liner consultancy Vespucci Maritime, in conversation with Splash today.
“With every day the lockdown issues in Shanghai continue this will amplify the ripple effects in the container supply chains in the coming months,” Jensen said.
At the moment, he said the effect is beneficial in the sense that less cargo is shipped to Europe and North America, in turn alleviating the port congestion – and for shippers providing a downwards push on spot rates.
It will take four to eight weeks for anything like a business as usual environment to be re-established
“Once Shanghai reopens we will have the exact opposite effect, and the magnitude of that effect will depend on the duration of the lockdown,” Jensen warned.
The problem with Shanghai, according to Xeneta’s chief analyst Peter Sand, is its unparalleled liner shipping connectivity – as the ripples are felt very much intra-Asia, but also ex-Asia.
“As the coming days will hopefully bring around a gradual easing, reefers with incoming food will get priority – but it will still take four to eight weeks, maybe even more, for anything like a business as usual environment to be re-established,” Sand told Splash today.
“It does seem that the China lockdowns have impacted the US logjam positively in the short term. But there will be a lot of disruptions when the lockdowns are lifted, and vessels will storm the east as well as the west coast ports. There will be an added element of panic shipping. This will further increase supply chain pressures and logjams in the US,” commented Christian Roeloffs, the CEO of box marketplace Container xChange.