China’s latest lockdowns bring shipping headaches and a silver lining

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IndustryWeek’s elite panel of regular contributors.

The Chinese government’s zero COVID policy continues to wreak havoc on its citizens and the global supply chain. The biggest impacts today are in Shanghai and Beijing.

Shanghai, a city of 25 million people, has been in lockdown since early April. Some companies have been able to operate in the area using a “closed-loop system”, where staff must live on site.

Two weeks ago, a small group of manufacturers in the car industry were allowed to reopen their factories. A second tranche of businesses has just been authorized to reopen. Dezan Shira & Associates reports that the second list includes some semiconductor, pharmaceutical and logistics vendors.

In the suburbs surrounding Beijing, the government recently issued a work-from-home order and shut down the school system.

For companies selling in the Chinese market, these restrictions mean lost sales because Chinese consumers cannot shop. For importers of items produced in the Shanghai or Beijing areas, quarantine restrictions have a significant impact on product availability. Even if a supplier’s plant is open and operating, trucking restrictions are in effect. Driver restrictions are impacting cross-border component deliveries. According to Maersk Lines, there has been a “significant reduction in inter-provincial trucks”.

Less freight arriving at the port means less freight available to ship. Shipping carriers responded to the drop in volume by canceling upcoming ship crossings. Over the next four weeks, 6% of transpacific sailings to Los Angeles/Long Beach are cancelled. This will keep ocean freight rates high, while giving ocean carriers time to get their fleets back on schedule.

There is a positive side to this drop in shipping volume: delays at ports and inland freight in the United States have eased. Los Angeles/Long Beach ship delays, while still high, are half of what they were at the end of last year. Chassis shortage eases and rail movements become smooth again.

Unfortunately, this is likely a short-lived improvement. There is a large volume of cargo waiting. Once restrictions in China are lifted, importers should anticipate a return of port congestion and delivery delays on all imported goods.

To combat these disruptions, companies importing from Asia should prioritize their critical shipments and customers, use alternative ports and routes where possible, and work closely with supply chain partners. to collaborate and reset expectations.

Lauren Pittelli is the founder and principal of Baker Logistics Consulting Services, a consulting firm focused on the needs of the industry in international trade and transportation. Its consulting services focus on 3PL selection and management, international air and sea transport, and customs and trade compliance. Prior to founding Baker, Lauren spent 30 years at leading international freight forwarding companies, managing their transportation, customs and contract logistics businesses in the Midwest. She is a graduate of Harvard College and a US Customs Licensed Broker.


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