What Does Shanghai’s Shutdown Mean for Global Shipping?

The alarming increase in new coronavirus cases in China has led to the shutdown of many of the country’s major ports. Among those affected are Shanghai and Shenzhen ports, the closures of which are expected to cause a ripple in the world economy. Experts predict that these developments will greatly affect the global shipping industry and supply chain.

The current lockdown is said to be more extensive compared to those declared at the beginning of the pandemic. The resulting delays could impact transport costs, prices of basic goods, and even commercial marine insurance rates.

Many analysts believe this situation could trigger the next supply chain shockwave. Already, there are growing fears that the lockdown will affect China’s domestic economy and cause global upheavals.

The situation in Shanghai

China is currently experiencing another surge of new coronavirus cases, forcing another series of lockdowns. As China’s “financial hub”, Shanghai has one of the world’s busiest ports. City officials have since extended restrictions in several key areas.

Seven more COVID-related deaths were reported in the city recently. The first lockdown was announced on March 27 after mandatory citywide testing revealed a surge of new cases. Residents were forced to isolate and remain under quarantine to slow down the spread of the virus.

The predictive intelligence company, Windward, reported 506 container vessels waiting outside Chinese ports from April 12 to 13. Before the current lockdown in Shenzhen, there were only 470 vessels in March and 260 in February.

According to Windward representatives, lockdowns have severely increased congestion outside Chinese ports. There are considerably more container vessels on standby now compared to February. The 506 vessels outside the ports this month represent 27.7% of all vessels waiting outside ports worldwide. In comparison, port congestion in February was only 14.8%.

The situation in Ningbo and Shanghai has worsened since lockdowns were first implemented in March. But it seems to be stabilizing as the number of ships on standby decreased last week. However, carriers still refuse to dock in Shanghai due to the steep decline in export cargo volumes.

Chinese officials have gradually been easing COVID restrictions in other parts of the country, but the situation remains volatile. Given the current surge, there is a high probability of an extended lockdown.

Shanghai’s COVID policies

Around 30,000 medics and 2,000 military personnel were dispatched to enforce lockdown measures and attend to the needs of quarantined individuals. Many locals criticized the new COVID protocols amidst challenges in obtaining necessities such as medicine and food.

There is also widespread criticism over Shanghai’s policy to isolate COVID-positive patients‒including children and babies‒in government facilities. One mother who was separated from her 2-year-old daughter on March 29 wasn’t allowed to visit the isolation ward until a week later. This zero-tolerance approach is expected to continue, given the highly infectious nature of the Omicron variant.

How lockdowns are affecting global supply

The Shanghai port has already been beleaguered by major holdups and delays in recent years. The current lockdown and the anticipated extension will likely worsen the congestion, increase transport costs, and delay shipments from several companies.

The truck transport industry has also been heavily impacted by the temporary closure of the ports. Long queues and high prices are some of the most significant signs of the crisis. According to a trucking executive, trips from Shandong to Shanghai increased from 7,000 yuan (about $1,058) to 30,000 yuan (about $4,500).

Conclusion

The continuous rise of COVID cases and the implementation of the lockdown will almost certainly cripple the global supply chain. Consequently, countless businesses around the world will likely be affected. Even now, thousands of freight containers have piled up waiting to be shipped, and still, there is no end in sight to the queue.

As China’s financial hub and one of the most active shipment ports in the world, Shanghai’s closure will have long-term consequences on the economy of China and the rest of the world. Considering that the city is a central port of exchange for numerous products and raw materials, the significance of the lockdown is nothing short of alarming.

Shipping industry experts predict the delays and congestion will remain for several weeks as China struggles to contain this latest surge. This means an indefinite period of uncertainty as the rest of the world waits for COVID restrictions to ease and ports to open.

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