The already struggling global supply chain must prepare for another shockwave in the coming months beyond the issues caused by Russia’s invasion of Ukraine. Nationwide COVID 19 lockdowns are emerging once again in China.
For Canadian manufacturers this could mean more delays in receiving equipment from overseas and higher transportation costs.
“Lockdowns in Shenzhen, Zhejiang, Shanghai, Jilin, Suzhou, Guangzhou and Beijing (19 provinces as of Sunday, probably more to come in a few days) imposed now will clearly heavily restrict container movement at these ports which will, as we’ve seen in the past, prove to be further damaging for the global supply chain. Clearly, 2022 has not brought any cheer to the supply chain industry. On top of this, war (in Ukraine) will just prove to be another disruption amongst the other innumerable factors for China’s supply chain,” says Container xChange, one of the world’s largest logistics tech companies and neutral marketplace for container leasing and trading.
Shenzhen’s port, which handled 26.55 million TEUs of cargo in 2020, is of particular concern as the city does the country’s second-most foreign trade by volume. The port city is a major manufacturing and tech hub. There are now eleven districts in Shenzhen on lockdown with government officials restricting the movement of more than 17 million residents.
Shipping container availability had improved soon after the Chinese New Year and Russia’s invasion of Ukraine had so far had negligible impact on container prices and leasing rates in China. In fact, pricing had been falling from their record levels in 2021. At the port of Ningbo, average prices for a 40-foot cube container fell by 10% approximately from $5930 on 14 February to $5329 on 27 February. As of 10 March, these prices stood at $5248. Similarly, average prices fell by 10-15% at the ports of Shanghai, Qingdao and Shenzhen till 11 March. Shenzhen witnessed a drop of 8% in the past two weeks.
However, the announcement of renewed nationwide lockdowns in China is expected to impede the flow of container movement as importers worldwide prepare for the coming peak season later this year.
“Lockdowns in China will further reduce capacity and cause a surge in already inflated shipping prices. The shockwaves will be felt across the Americas, and almost everywhere in the world,” said Dr Johannes Schlingmeier, co-founder and CEO, Container xChange.
The Russian invasion of Ukraine will also cause supply chain issues downstream. The immediate impact is that Russian ports were not being called by the national shipping lines anymore, the Black Sea being closed, and the Asia-European railway being impacted. This will cause the high-value cargo to be pushed to ocean freight, which is already low in capacity, placing more pressure on the struggling supply chain.