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.

Earlier today authorities in Langfang, which borders Beijing and Dongguan in the southern province of Guangdong imposed immediate seven-day lockdowns, joining Shenzhen, which started a seven day lockdown on Sunday, while the entire province of Jilin has been placed in complete lockdown and Hong Kong restrictions are continuing, as China’s COVID cases jump.

COVID cases doubled in the past 24 hours across the nation with attention turning to Shanghai, where Shanghai Pudong (PVG) Airport has been closed to inbound passenger flights and 106 diverted to 13 other cities, which will continue for six weeks, in a bid to stop the spread of COVID cases.

Shenzhen announced new COVID restrictions on Sunday, with a lockdown for the next seven days and non-essential workers staying at home. Adults must undergo three PCR tests in the coming days, and buses and subway trains are being halted. 

Our network office in Shenzhen will be closed this week, with staff working from home.

Foxconn, which manufactures iPhones for Apple, stopped its operations in Shenzhen on Monday, saying the date of resumption would "be advised by the local government".

Toyota, shut its factory in in Jilin province, but did not give a timeline for when business would resume and Volkswagen shuttered operations in Changchun and hoped to reopen its factory on Thursday.

Local governments are making special measurements and arrangements, so that imports and exports are not inhibited. The airport is operating normally, though with reduced staffing levels and flights are being cancelled or redirected to other airports.

Customs and trucking services are operating normally although there are restrictions on where they can travel due to the movement of drivers, and while we have not yet been advised of any official limitations to Yantian Port, the offices of carriers in Yantian are closed and low operating efficiency is expected.

Until now, shipping lines in Hong Kong have largely been operating as usual, but the suspension of flights from Australia, Canada, France, India, Pakistan, the Philippines, Nepal, the USA and UK will be extended until the 20th April.

Hong Kong Air Cargo Terminal is operating under increased pressure, due to a reduced workforce of about 30%, while trucking services to Hong Kong via the Shenzhen border have been suspended and the alternative of using feeder vessels to Hong Kong incurring cost and transit time. 

China regional round-up

Guangdong - There are some backlogs and delays at the airport.

Nanjing - Nucleic acid test are required to enter. Otherwise situation is largely normal.

Ningbo - Normal operations for transport, offices and factories.

Qingdao - Air and ocean are operating as normal, but there is limited capacity at the port terminal, due to restricted worker numbers. 

Shanghai - High-risk areas are in lockdown, but there is no complete lockdown of the city. Air cargo and charter flights are operating, but the decisions to close Shanghai Pudong airport to inbound passenger flights will reduce capacity and put pressure on rates. Trucking services and ocean are operating.

Xiamen - Normal operations for transport, offices and factories

Some areas including Hangzhou, Wenzhou, Jiaxing have local measures in place, with factories and community closures based on local conditions.

Yantai, Weihai and Zibo have been locked down, which means trucking services cannot be provided to these cities and also means some drivers may not be happy to go to Qingdao.

Despite the challenging situation in many regions, we work closely with our network partners, carriers and own offices across China, to monitor the situation and find solutions for our customers, including time-sensitive shipments.

The situation continues to unravel daily and we will keep you advised as new announcements are made and market intel is received from our colleagues in China. It is expected further lockdowns will be applied and stay at home orders given to workers over coming days. We are monitoring closely and will advise if shipping lines, airlines or inland transport become affected and schedules are delayed.

We maintain long-term contracts with airlines, carriers and shipping lines that secure space and rates, to provide the best alternatives and options, whatever the situation.