Shanghai lockdown

28th March: Shanghai lockdown in two waves

Mar 28, 2022 | ,

After recording its highest daily number of cases on Saturday, with Omicron leading a spike, Shanghai, China’s most populous city and a global financial hub, will be locked down in two stages over nine days while authorities carry out infection testing.

Authorities had so far resisted locking down the city of some 25 million people to avoid destabilising the economy and while case numbers are not high by some international standards, authorities have decided to take action.

The lockdown will happen in two stages, with the eastern side of the city under restrictions from today until the 1st April and the western side from the 1st to 5th April. The staggered approach to this lockdown means half the city will remain functioning at a time.

Public transport will be suspended and firms and factories must halt operations or work remotely and all residents will be subject to mass city-wide Covid testing.

Shanghai’s container ports and airport will remain open, although staff levels and COVID-safe working practices mean there will be an impact on terminal operations, collections, deliveries and handling efficiency.

Airlines are reviewing the situation and some further cancellations are likely. Expect air freight to use other regional airports and a general rate rise from other major gateways. Diverting cargo to other airports is typically more expensive, for trucking and air freight and adds time to overall transit. Any air cargo received or available at Pudong Cargo Centre will be processed but currently, as we understand, new shipments will not be accepted for export.

For full load containers (FCL), there is a green channel set up for trucks to move to port/Pudong, which requires the driver to provide a COVID negative testing report within 48 hours. 

And while it means that our FCL traffic can continue in the short term, locating drivers will get increasingly challenging, as restrictions from surrounding cities on drivers and especially from Shanghai regions will lead to continued and escalating trucking problems. This will in fact affect all modes of service and not just FCL export freight.

LCL operations are not possible at this time and we have, reluctantly, had to hold this week’s service as warehouses in Shanghai are currently not allowed to be staffed or operate.

Our local offices are working from home and keeping us informed of the changing situation, while minimising any impact on our customers and smoothing shipments, as much as possible.

The lockdown will result in a demand slow-down in the short term, followed by a surge and upwards pressure. And the disruption is on top of the Shenzhen lockdown from the last few weeks.

Many factories in the Shanghai area will also be forced to close production over this period. The result is  that if product cannot be made it cannot be shipped and cancellations are expected over the coming days and weeks.

Currently the biggest impact would seem to be on inland transport, with the first/final mile element of the supply chain, due to internal city and provincial restrictions.

Please be aware that although this is specific to Shanghai in today’s announcement, there are also many other areas and regions being impacted with similar lockdowns and difficulties – Shanghai is only the latest city to be effected.

Inbound shipments into Shanghai and the areas that are currently under lockdown restrictions throughout China are also being severely compromised both at arrival ports and airports.

NOTE - 4-5th April is Qingming Festival and Tomb Sweeping Day public holidays. All offices and many factories in China are closed at this time. Adding further pressure on an already challenging environment in China.

Coronavirus impacts air and sea freight

The sea and air alternative from China

Mar 24, 2022 | , , , ,

China to Europe rail freight services have grown massively since the advent of the COVID pandemic, with volumes surging 29% last year. But with services transiting Russia and Belarus sanctioned and the Ukraine route halted, the equivalent of 1.46 million TEU needs alternative solutions.

Trains are still running along the Trans-Siberian route, but Russian Railways has been sanctioned so bookings have been suspended, with much cargo diverting to slower ocean services.

While cargo is not directly targeted, the uncertainty surrounding sanctions against Russia and Belarus means there is a very real risk of shipments getting stuck in either country during transit and there is no evidence yet of the impact of sanctions on insurance and settlements.

The China-Europe rail freight service from Shanghai has reportedly seen a 40% drop in bookings and its frequency has been reduced, while the Silk Road freight train from Vietnam, which operates via Zhengzhou, has been suspended. 

Alternative rail routes operate below the Trans-Siberian, through Kazakhstan, Azerbaijan, Georgia and Turkey via the Caspian Sea, or Romania via the Black Sea.

These routes mean longer transit times however, and could potentially face increased congestion, with seven or eight reloading processes before arrival in Europe.

The southern lane via Baku and Istanbul is likely to be a popular choice for rail enthusiasts, departing from Xian, with a mooted transit of 35 days to Germany, although this is likely to be longer and another 5+ days need to be added up to arrival terminal.

In practice sea freight rates are less and the transit time to main European ports faster and arguably safer than rail. Any substantial volume shift from rail to sea is likely to increase congestion, with demand increasing over 5% on an already over-subscribed trade route.

The effective alternative

Avoid the uncertainties and inefficiencies of sea and rail, by combining effective and reliable sea services, with dependable and rapid air cargo services, for reliable time-sensitive freight solutions from Asia.

Metro sea/air services operate via established and proven hubs in Singapore and Dubai, together with a selection of secondary transhipment hubs, to provide greater resilience against disruption and additional routing options for speed and cost options.

The most effective sea/air solutions use feeder vessels to move the freight to where the most appropriate air freight capacity and routing is available, at the most attractive cost. 

The first leg of transit is undertaken in a conventional ocean freight container, often on low-cost feeder vessels, but always on a direct and much shorter transit than would be the case on an all-ocean service.

This reduces the impact of incidents at ports and avoids delays, because short-sea transits have not been impacted by the service disruption and cost increases seen on deep-sea services.

Singapore and Dubai are two of the biggest pure freighter and passenger freighter airports globally, which means they retain a relatively high number of passenger flights, and consequently critical belly-hold capacity.

We continue to receive daily booking and departure requests and have the capacity, ability and reliability needed to deliver within timelines and to your deadlines.

We operate regular services from all major areas of manufacture; with Singapore servicing the Far East and South East Asia trades and Dubai geographically well located to serve suppliers in the Indian Sub-continent and further afield. Expert solutions that work, and have done for decades, when the market needs them – as they do now.

We recommend sea/air as a standard component in your supply chain toolkit, to plug gaps and fix delays. Elliot Carlie and Andy Brooks head the sea/air team and are available to discuss your situation and requirements.

ships at anchor

China ship queues growing with further disruption to schedules

Mar 24, 2022 | , ,

Despite key Chinese ports, including Shenzhen and Shanghai, operating normally, land-side logistics disruption, in the wake of the latest Covid-related lockdowns is inevitable and vessel queues are growing.

Queues of container ships outside major Chinese ports are lengthening, despite ports continuing to function normally - though with limited capacity - because many of the most profound problems lie on the landslide, with the strict Covid measures hampering trucking productivity, making it difficult to get cargo to and from the ports.

Vessel waiting times at Shenzhen terminals has grown longer, with an average wait of three to four days at Yantian International Container Terminal (YICT) and five to seven days at Shekou Container Terminal.

The spread of the highly-infectious Omicron variant this month has led to movement controls across China, which is debilitating transport operations and the ability of drivers to collect and deliver. So while ports remain open and vessels are continuing to dock, congestion is building up and some container ships are re-routing to avoid expected delays.

The current developments around Covid lockdowns in China and sanctions imposed on Russia is creating more supply chain uncertainty and congestion will go up as delays extend, which means we will work even harder to get our customers’ cargo moving around those obstacles.

Shenzhen city reopened on Sunday and while the Yantian container terminal continued operating throughout the lockdown, the impact on ocean freight is due to trucking restrictions when picking up from outside Shenzhen, or in a locked-down area.

Even with ports open, the lack of terminal handling staff and expected trucking delays are compelling some carriers to skip calls, or accept they will keep vessels waiting.

Maersk will skip calls at Shenzhen on three sailings later this week after the port imposed restrictions on cargo exports to limit congestion in the container yards at its western terminals.

Trucking capacity between Shenzhen and nearby cities is estimated to have dropped by 20%, or even more in some regions, due to the need for drivers to produce a negative test, which means longer delivery times and a possible rise in transport costs such as a detour fee or a highway fee.

Cross-border trucks between Shenzhen and Hong Kong are also affected, with capacity dropping by at least 70% as authorities impose tougher quarantine and testing requirements on drivers, with long waiting times, leading to transport by ocean to overcome the limited truck capacity. 

In Qingdao, terminals are still operating, but port productivity has dropped due to tightened coronavirus measures, with more than 70 vessels waiting to berth, double the number in February.

In Shanghai, which was said to be on the brink of lockdown and already imposed restrictions on passenger flights, warehouses and terminals operate as normal, but require the driver to be tested within 48 hours before delivery which is limiting trucking capacity and caused some shipments to be moved out of Ningbo.

Meanwhile, there have been reports of lengthening ship queues outside Chinese ports, with 262 vessels waiting outside Shanghai and Ningbo, up from 243 last week.

Supply chains have never faced so many challenges and with local conditions changing rapidly it is critical that you have the support of dependable partners. 

Metro will always share the latest news and most important developments, providing you with the best alternatives and options, to keep your supply chain optimised. 

For further information and to discuss your ongoing requirements please contact Elliot Carlile.

We continue to monitor the situation daily, which is very fluid, to update our advisory…….please look out for our announcements, or speak with your Metro account manager for the latest information.

Shenzhen lockdown

China lockdowns impact on logistics

Mar 24, 2022 | , ,

Following their seven-day lockdown, Shenzhen has reopened for business, but it could take weeks for cargo flows to recover, with vessels queuing and Yantian port throughput down 40%, amid concerns that COVID surges in other regions will affect supply chains, as strict controls, restrictions on inland transport, extensive testing and lockdowns has ramifications on supply chain operations.

With a third of the world's manufacturing capacity based in China, supply chain disruption is a really big deal, particularly so in Shenzhen, which is home to major tech manufacturers and half of China's eCommerce exporters.

So, when Shenzhen went into lockdown last week after a massive surge in Covid cases (by Chinese authority standards) , it sent shockwaves through supply chains, with restrictions since widening to major provinces like Shanghai, Jilin and Guangzhou.

The number of ships waiting at Chinese ports has risen, with 34 vessels waiting outside Yantian (compared to an average of seven a year ago), which is the same port which closed due to COVID, causing major delivery delays over Christmas.

Maersk has forecast that vessel waiting times will increase in Shenzhen and that COVID flare-ups will cause port pressures at key gateways including Qingdao, Shanghai and Ningbo.

The new COVID control measures come at a time when manufacturing was just starting to recover after the Chinese Lunar New Year holidays, but while China's Covid measures are drastic, most don't last too long, which means short-term disruptions but then, things get back to normal relatively quickly.

President Xi Jinping affirmed just last week that China would stick to its zero-COVID policy, but he also emphasised that pandemic measures should not cause economic pain.

If China continues with its zero or close-to-zero COVID strategy (very likely for various reasons), it may be China's economy and the global consumers it supplies, who will feel the real pain.

Ocean carriers are assessing the impact of the muted CNY/COVID-lockdown throughput and are considering whether to hold ships or blank sailings until they can achieve full load factors. Many already are and have announced changes to schedules, in essence withdrawing and restricting supply.

The lines simply don’t want to sail ships that are only partially full from China, when they know there is cargo held back in the system, that will be released as production, warehouse and trucking operations return to normal.

There have been more than 7,000 COVID cases in China, in the first two weeks of March, which is the biggest surge since the start of the pandemic and with more lockdowns and restrictions likely, the disruption to trucking and freight infrastructure will increase delays in despatching cargo by air and sea.

The southern Chinese manufacturing hub of Dongguan has imposed strict COVID control measures and many businesses have been ordered to suspend operations or operate at a reduced capacity, whileChina’s largest city, Shanghai, has shut schools and public parks, with people told to work from home, while warehouses and terminals operate as normal.

Reduced land-side trucking capacity is expected to continue at all main ports, due to the current pandemic-safe operating regime, with long waiting times for control and restrictions for travel, effectively reducing the capacity available for cargo collections and deliveries.

The remote working of many companies is impacting operating capacity, effectiveness and the speed of communication, which means factories may not meet planned delivery schedules, which is why we recommend checking with your vendors, to clarify the status of your orders.

Metro’s cloud-based supply chain management platform, MVT, simplifies the most demanding global trading regimes, by making every milestone and participant in the supply chain transparent and controllable.

With end-to-end visibility across the extended supply network and global control down to individual SKU level, it is simple to adapt to external developments. Changing supply lines, managing existing or adding new vendors, monitoring product flows and outbound order data, from any location.

To discuss how our technology could support your supply chain, please contact Simon George our Technical Solutions Director or Elliot Carlile.

Category: China

China | Coronavirus | Sea | Supply Chain

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