China’s Zero Corona Blockade, CNY Holiday Impact Supply Chain, Ports

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The streets of Tianjin, China, were emptied on January 10, 2022. This is due to the partial blockade of the city after the surge in Omicron incidents.

Genohou | Future Publishing | Getty Images

Blockades, quarantines, and regulations have created “confusion” and, in some cases, boosted air cargo by as much as 50% in some of China’s major ports, analysts said.

Prior to the Lunar New Year holidays in China, airfares have skyrocketed, some shipping companies have ceased services, and the overwhelming supply chain is once again in the spotlight.

This is because China is promoting the Zero Corona strategy. In short, the recent surge in infections has led to blockades and controls in the country’s largest port hubs and major cities.

“The port is still open, but current restrictions such as forced quarantine and testing continue to delay and cause delays,” Atul Vashistha, founder and chairman of supply chain consultancy Supply Wisdom, told CNBC. Told.

He added that China’s current top priority is to limit the spread of the Covid case ahead of next month’s Winter Olympics and the upcoming Lunar New Year. However, subsequent curbs at the harbor also caused some “confusion.”

“Products are piled up while ships are off limits. 2022 seems to be over 2021 until the last and last rerouting takes place due to negative PCR testing requirements. It starts with and is confusing, “Vashistha said of the polymerase chain reaction Covid test.

Shenzhen, Tianjin, Ningbo’s major port cities, and Xian Industrial Hub, Spark blockade and other curbs.

Infectious diseases have also been reported in other cities, including: Dalian When Anyang.

The Beijing capital reported the first local infection, Omicron, on January 15. Sunday, two weeks before the Winter Olympics, Beijing authorities have introduced new restrictions To contain recent outbreaks after nine cases of local infection were discovered in Beijing the day before.

The Outbreak of Ningbo in December It also caused some curbs and disrupted traffic at Ningbo-san, the world’s third busiest port.

Operations have since resumed, but freight has been directed to Shanghai, the world’s busiest port, which has also caused congestion and delays, Judah Levine, head of research for the Freightos Group freight booking platform, told CNBC.

Supply chain technology company project44 said the shift from Ningbo Port to Shanghai “backfired on some shippers” as the congestion in Shanghai increased. As a result, Shanghai recorded an 86% year-on-year increase in air voyages. This is the industry terminology when an airline decides to skip a particular port or the entire voyage.

In an email to CNBC last week, Freightos’ Levine said all eyes were on China and strict outbreak containment could give logistics. “Steps have been taken to curb the spread of positive cases detected in Beijing, Shenzhen, Tianjin, Dalian and several other places,” he said on January 19.

Rising airfare

On the route from Asia to the west coast of the United States, shipping spot rates rose 4%, according to Levine, but rose further as production paused as Lunar New Year holidays approached and factories closed. It is unlikely that you will. For a long time.

However, he added, air freight rates are still skyrocketing.

“The pre-holiday rush is pushing up air freight rates, along with pandemic limited capacity, as we still have enough time to airlift,” he said, and the Freightos Air Index charges 9.59 from China to Northern Europe. He added that he showed that it was a dollar. Per kg in mid-January — Increased by more than 50% from less than $ 6 per kg in early January.

Lunar New Year is China’s largest holiday, with hundreds of millions of people returning from the cities they traditionally work to to their hometowns.

According to Vashistha, some major shipping companies, such as Ocean Network Express and Hapag-Lloyd, shut down services and operations earlier than last year to celebrate the season. He said it is already straining the fragile supply chain.

This latest shock happens at a bad time for the global supply chain. They have already been stressed in combination with Omicron variants since Christmas, but China’s port problems are taking these complications to a new level.

John Ferguson

Impact of economists

Paul Grünwald, chief economist at S & P, said transportation costs have fallen over the past two months as supply chain backlogs have eased, but the recent surge in Covid and potential port closures so far. It casts a shadow on the progress of. Global rating.

He told CNBC’s “Squawk Box Asia” Thursday.

Impact of China’s Zero Corona on the Winter Olympics

China’s zero tolerance for Covid has a significant impact on the global supply chain, said John Ferguson, a practicing leader in globalization, trade and finance for think tank economist impact.

“This latest shock has come at a bad time for the world’s supply chain. From Christmas time, it was already stressful in combination with Omicron variants, but China’s port problems are: We are taking these complications to a new level. “

“China’s zero-corona strategy is important. Further outbreaks will result in more closures or blockages in key areas,” he told CNBC. “Given that China will host the Winter Olympics and important political events later this year, it is unlikely that China will abandon its Covid strategy in 2022.”

One of the bright spots is that many companies are already preparing for stressful supply chain scenarios and are currently planning.

Still, it’s not all a normal voyage.

“Global companies are becoming more agile in this crisis, but we need to anticipate a delay from this latest supply chain stress,” he added.

Vashistha of Supply Wisdom summarizes: Or where to go. “

China’s Zero Corona Blockade, CNY Holiday Impact Supply Chain, Ports

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