Contrary to what many of us tends to believe, the pandemic has still not gone for good. Although the intensity of the outbreaks has lessened to a great degree, it seems that the virus will continue to plague us for a few more months. The Covid situation in Shanghai- the commercial hub of China is becoming a cause of concern for the transportation and logistics industry. The ongoing lockdown in the city which is the busiest container terminal in the world could potentially disrupt the already stretched global supply chains. In today’s post, we have talked about the recent lockdown in Shanghai and how it could impact the transportation and logistics industry.
The recent Covid outbreak in Shanghai
Apart from being the home to the world’s busiest container port, Shanghai is also the financial hub of the country. Several international companies from Tesla to Disney have their offices in China. In the last few weeks, business activities in this bustling commercial centre have come to a halt because of a spike in Covid cases. The government has imposed a lockdown on this city with little notice. Over 26 million inhabitants of Shanghai are presently confined to their houses. The authorities deployed around 38k medical officers to the city where they are mass-testing the citizens.
Although by international standards the number of infections and fatality rate is very low, the situation has become worrisome because of the zero Covid tolerance policy of the Chinese government. The lockdown is proving to be extremely costly not only for China but also for the global transportation and logistics industry.
Impact of the lockdown on the container shipping industry
The lockdown has resulted in major delays at the Port of Shanghai which was already dealing with the problem of congestion. According to international shipping data company VesselsValue, the number of ships queuing up at the Shanghai Port has steadily increased in the last couple of weeks. To quote from their report, “Congestion in Shanghai usually worsens at this time of year. However, the recent increase is far higher than both last year and normal seasonal levels.” This has prompted logistics managers all over the world to start making contingency plans. Maersk has already advised its clients about possible delays in the coming weeks as well as a hike in transportation expenses. Moreover, the lockdown has also impacted the trucking sector.
Presently, there is a shortage of drivers for moving cargoes in and out of the port. However, the government has stated that freight operations will continue normally during the lockdown. Shanghai International Port Group has implemented a closed-loop system that necessitates the workers to remain in particular zones and abide by the protocols to prevent the spread of the virus. Nevertheless, the long queues at the checkpoints, the possibility of quarantine upon return, the Covid test requirements, and the restrictions on movement are making it difficult for the truck drivers to deliver and pick up the cargo on time. According to Xu Tianchen, from the Economist Intelligence Unit of China, “There will also be ripple effects elsewhere because of the interconnectedness between Shanghai and other regions of China, especially the manufacturing hub of the Yangtze River Delta.”