Shanghai lockdown will send severe shockwaves to the global supply chain. The city of nearly 26 million will enter into a phased lockdown for nine days from today. The authority has taken this step to curb the worst Covid resurgence since the disease outbreak in late 2019.
This month, the Shanghai Port has already been struggling with port congestion due to partial covid curbs. This 9-day extended lockdown will severely affect the port operation and increase port congestion in its wake.
This prediction comes given the disruption caused by the week-long lockdown in Shenzhen province earlier this month. Although port authorities in Shenzhen had assured regular operation, the situation on the ground remained significantly different. Just as the global shipping industry was recovering from the supply chain problems and disruption, the Shanghai lockdown brought new concerns to the worldwide supply chain.
The densely populated city registered locally transmitted 2,631 asymptomatic and 47 cases with symptoms on Saturday. These case numbers account for nearly 60% of the country’s total covid cases. The spike on Saturday has accounted for the highest daily increase.
The city has been grappling with particular curbs in residential areas, given the covid outbreaks. But this total lockdown came with a complete halt in a total ban on public movement, public transport and monitored the activity of essential vehicles. Factory and production units will close down during the period barring critical productions like food.
The city authority has planned a two-part lockdown. Pudong, the eastern part of the city along the Huangpu river, has entered a lockdown from 28 March till 1 April, while the western side, Puxi, will remain out of covid lockdown. The lockdown on the city’s western side will come into effect from 1 April till 5 April. In the meantime, the citizens will have to go through mandatory mass testing.
City authority has procrastinated a city-wide lockdown given Shanghai’s status as China’s economic hub. They cited that any broad range restriction will affect the global supply chain.
The country has registered 4500 new local cases on Sunday, which is relatively low by the case counts in other parts of the world. But the numbers challenge China’s ‘zero covid’ policy. Hence, the Shanghai lockdown came even at the risk of a global supply chain shock.
Even though organizations like Shanghai International Port Group (SIPG) reiterated, “The port will strive to maintain normal port operations and provide 24 hours services at its all port production units.”
The experts predict significant disruption in the port terminals’ short-term and long-term operations. Workforce and transport will provide the most critical challenge. The lack of public transport and covid restrictions will see ports are short on staff.
Previous selective lockdown in Shanghai had enabled essential transports of cargo containers for a port operation like trucks to move freely between different provinces. But now, the city’s truckers can freely move to the port, truckers from outside the city will require negative test results to enter. The hindered movement of shipping container trucks will result in slow turnover at the shipyards, which will affect the throughput in the period.
Peter Sand, chief analyst of Xeneta commented, “The frequent Covid tests of truck drivers will play havoc on the movement of containerized cargo. This disruption will cause a fall in spot rates in the coming times. Furthermore, suspending factory and production units will probably add more woe to the already critical situation.”
Lars Jensen, CEO of consultancy Vespucci Maritime, echoed the same, “This widespread lockdown will see a demand slow-down in the short term and downwards spot rate pressure, followed by a surge and upwards pressure.”
As soon as the lockdown comes to an end, there will be a surge in vessel queue, which will add to cargo delays in coming times.