COVID-19 lockdowns in China threaten to impact the global supply chain

Disruptions in the global supply chain have impacted all of us in recent months. Now, shoppers and businesses around the world are facing further delays, especially for goods shipped from China.

Whether you’re a consumer waiting to receive that new bicycle or laptop you ordered online, or a merchant trying to get your goods to market, the rapidly changing situation in China is likely to affect all of us. Here is an overview of the latest news.

What is causing the supply chain disruptions?

Since the beginning of the global pandemic, supply chains have been under strain due to the heavy increase in demand for consumer goods. To make matters worse, the pandemic has also impacted the workforce, resulting in few truckers, port workers and other essential workers being able to do their jobs as usual.

Another challenge is China’s strict ‘zero-COVID’ policy to stop the spread of the coronavirus. This has already resulted in a series of lockdowns in cities throughout the country in recent months. Major port cities like Shanghai, Ningbo, Shenzhen and Tianjin have been among the areas affected.

Lockdowns in these key transport hubs threaten to impact the entire global supply chain. The recent developments have HSBC economists warning that we may soon be heading for ‘the mother of all’ supply chain disruptions. And with Chinese New Year (CNY) on 1 February fast approaching, there will almost inevitably be further delays in getting goods to markets around the world.

Which Chinese ports are affected by the lockdowns?

As of week 2, 2022, COVID-related lockdowns are affecting port operations at the following major Chinese transport hubs:

Tianjin

Tianjin, the world’s 8th largest container shipping port went into a partial lockdown on 9 January after 40 residents of the city tested positive. The city is now conducting mass testing on its 14 million citizens.

Pick-up operations for all import containers have been suspended. Staff shortages at Tianjin Airport and ocean port terminals are currently expected to delay cargo delivery by at least an additional 48 hours.

Ningbo 

The situation in Ningbo, the world’s 3rd largest container shipping port, is rapidly improving. The port has now largely returned to normal operations.

A lockdown went into effect here on 1 January but has since been scaled down to only the district of Beilun. The lockdown has resulted in many shipments being redirected to Shanghai, which is already dealing with severe port congestion. 

Although Maersk has announced that container gate operations in Ningbo have now fully recovered, there are still reports of shortages of truckers and landside crew, as well as materials shortages.

Shenzhen 

There are concerns that Shenzhen, the world’s 4th largest container shipping hub, may soon enter a (partial) lockdown. The municipal government announced on 13 January that there have been 14 confirmed cases of COVID-19 in the city, which shares a border with Hong Kong. 

Under its zero-COVID policy, China has enforced strict lockdowns in the past months even in cities where only a relatively small number of cases are reported. The port authorities in Shenzhen are now performing mass testing of workers and truckers. This is already expected to cause delays, which will only become worse if the city is forced into lockdown.

Shanghai

While currently not in lockdown, Shanghai is facing heavy port congestion. Shipments redirected from Ningbo during the lockdown there have only added to the backlog. Currently, many ships are expecting around a one-week delay.

An outbreak at a bubble tea shop in the city in early January has led to the first reported cases there since December. The city is now in a state of ‘COVID alert’ which may result in lockdown measures if further cases are detected.

Dalian

The omicron variant of the coronavirus has been detected among residents of this major port city. So far, the port remains in operation, but concerns are growing that it may soon also be affected by lockdown measures.


Background: The World’s 10 Largest Container Shipping Ports

According to OECD, 90% of goods traded around the world are transported to market by container ships. Global container shipments are measured in twenty-foot equivalent units (TEUs), with an estimated 827 million TEUs being shipped through ports around the world in 2021, up from 775 million TEUs in 2020.


A huge chunk of those TEUs are shipped through the following 10 superports (mostly in China), which are the world’s largest container shipping hubs:

Source: World Shipping Council


When will things get back to normal?

Both shoppers and business owners alike just want to know when their goods will be arriving from overseas. The situation is rapidly changing at the moment. In the past, China has responded swiftly to COVID-19 outbreaks in an attempt to prevent the disease from spreading on a large scale. 

Due to its so-called ‘zero-COVID’ strategy, China shut down the Meishan Terminal at the port of Ningbo in August 2021 after one port worker tested positive. The terminal remained closed for nearly two weeks, resulting in major disruptions that left many holiday shoppers in Europe and the Americas facing long delays to receive their merchandise. 

In some markets, like the UK and US, shoppers faced shortages of consumer goods on supermarket shelves in recent months. However, these breakdowns in the supply chain were often related to local labor shortages rather than lockdowns in China. 

Although global supply chains faced heavy delays throughout the final months of 2021, the New York Federal Exchange announced in early January 2022 that the worst of the supply chain crisis was now over. However, the recent lockdowns in Tianjin and Ningbo and the outbreak in Shenzhen may now lead to a new round of delays.

These lockdowns also coincide with the Chinese New Year season, which always brings delays in the global supply chain, as many Chinese transport companies suspend service for the holiday period. Leading up to Chinese New Year, freight prices also peak due to limited capacity across the shipping industry.

After the major lockdown in Ningbo in August, experts estimated that it would take up to 60 days for normal port operations to resume. According to an industry insider, it is currently recommended that retailers plan at least 70 days further in advance, compared to normal shipping schedules. In light of the new round of (partial) lockdowns, we are likely to experience significant delays in shipping until after the end of the CNY season in mid-February.

How can businesses minimize delays?

While it is impossible to avoid some supply chain delays at the moment, Shypple recommends planning far in advance. If you are importing goods from any of the affected ports, plan at least 60-70 days further in advance than usual to help ensure your merchandise is on the market in time.

For companies importing smaller freights from China, you may consider using air transport. While air freight has also been affected by higher prices, capacity shortages and lockdowns in China in recent months, but delays have been less severe than on container shipping routes.

What can we expect in the months ahead?

As with many topics during the COVID-19 pandemic, the situation in China’s port cities is currently highly unpredictable. Over the past months, we have seen that even relatively small outbreaks in the country can result in weeks of closures and months of shipping delays.

There is also no sign that this policy will change any time soon, as China prepares to host the 2022 Winter Olympics in Beijing, starting on 4 February.

With potential lockdowns looming in China, and Chinese New Year and the Olympics right around the corner, we can expect almost certain delays in the months ahead. Retailers who are able to plan their logistics far in advance will have a strong advantage.

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