Domestic and Global Impact of Shanghai’s Covid-19 Lockdown
Lockdowns in various Chinese cities have increased pressure on logistics and transport, as Covid-19 cases continue to rise across the country. The trucking industry has been hard hit, which plays a key role in shipping cargo to major ports in China. There are also restrictions on deliveries and truck drivers moving goods to areas with a high Covid-19 count.
According to domestic freight forwarders, trucking is the main problem at present. Booking truck services has proven extremely challenging and even impossible at times. Also, flight activity has shrunk to 3 percent from what it was in March, with medications and essential goods making for the bulk of air freight shipped into the Shanghai Pudong airport.
As cargo is not moving, it is diverted to other regions and away from the port of Shanghai, which can affect virtually every industry and trade in the country.
In Shanghai we have witnessed the worst Covid-19 outbreak the last couple of weeks, with close to 20,000 cases on Thursday. Major carriers warn that the lockdown measures and restrictions will affect trucking services in Shanghai, reducing trucking activity by 30 percent.
A 9-day lockdown was ordered initially, but it is still unclear when the restrictions are going to be eased. According to Japanese bank Nomura, 200 million people and 23 cities are currently under a partial or full lockdown. Mobility is restricted in many areas across China, and mass testing has been ordered in many cities. The exit and entry points on major highways are blocked, straining the domestic supply chain. Express delivery carriers report that small shipments cannot be delivered to any region with a surge in Covid-19 cases.
Experts warn that domestic supply chain disruptions can cause ocean shipping delays and spot rate increases. This is mainly due to the build-up of orders and the volume of cargo that needs to be shipped. While there are no long queues of vessels waiting to call in Shanghai, the volume of cargo shipped to the port of Shanghai has dropped by 30 percent. Once the city reopens, we will see a surge in activity, causing pressure on spot rates.
Financial analysts also point to the fact that China’s closed borders and mass lockdowns are set to have a significant negative impact on the global economy. Business exchanges between China and other countries have plummeted in number, causing foreign direct investment to shrink since the onset of the pandemic. The limited share of FDI has affected developing countries with significant financial needs.
On the good side, global demand for goods has started to ease in recent months as consumers across Europe and the US are spending more on travel, entertainment, and dining. The fact that both emerging economies and developed countries are reopening means that local businesses are already able to meet some of the pent-up demand. Most experts believe this will help avoid the suppl chain disruptions we have seen in 2020 and 2021.