Shanghai has been locked down for just over half a month, initially just the east side of the city for four days followed by the west side. Eventually this proved ineffective in the authorities efforts to contain the corona virus, so the government closed the entire city indefinitely. This has had a knock on to the supply chain, the congestion around the port is severe and warehouses have been closed since late March. While the world’s largest container port has generally remained operational and Chinese officials have said they will help more than 600 firms restart operations, what knock on effects will this have on the wider world’s trade?
Labour shortages
The manufacturing, financials and shipping hub of Shanghai saw a surge in Covid infections and was locked down by authorities for mass testing in late March. The lack of yard space led to Maersk not accepting bookings for dangerous goods on the 14th of April .
Some firms have already restarted their operations in Shanghai by having their employees remain on site, it’s estimated that less than 1/3 of the workforce is eligible to go to work due to the ongoing lockdowns. There’s a large gap between the policy of the Chinese government and the reality of the implementation.
On Thursday 21st April the American Chamber of Commerce in Shanghai said officials were still coordinating how workers and goods will move across Chinese provinces.
The knock-on effects
Maersk weren’t the only shipping company to report issues due to the Shanghai lockdown, Ocean Network Express (ONE) have reported that the terminals are congested and yard capacity is highly stressed. But the issues obviously haven’t just affected the shipping companies, manufacturers have had to either reduce their output or shut down production completely.
Tesla has restarted production since restrictions have been eased, but production at the Shanghai factories of Volkswagen and the Apple iPhone manufacturer Pegatron remain closed.
With the slow down of production for consumer goods, this will eventually see delays elsewhere in the world. Firms with operations in China expect their profits to fall this year because of these restrictions with their expectations of being able to attract and retain foreign talent also impacted by the lockdown.
The situation is now going to be a balancing act between controlling the spread of the virus in Shanghai and restoring production and operations to a normal level of functionality, easing the month long bottleneck that will impact business activities likely for another two or more months.
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