Manufacturing and logistics operations in Shanghai are grinding to a halt as China holds fast to its zero-tolerance COVID policy, marking the largest city-wide lockdown in China since the COVID outbreak began over two years ago.
Local authorities announced yesterday that the city of 26 million will be locked down in two phases over the next nine days. The first phase began at 5 a.m. today for areas east of the Huangpu River, including the financial district of Pudong, and will run through April 1 as mass testing gets underway. Phase two of the lockdown will run from April 1 – April 5 for areas west of the Huangpu River, including the downtown area of Puxi.
Under the lockdowns, all non-essential businesses in the affected zones, including factories and distribution centers, will be required to suspend operations, and residents will be barred from leaving their homes. Essential workers, including airport and container terminal labor, will be exempt from the stay-at-home orders, with a portion of the personnel required to stay on site to maintain operations.
While Shanghai Pudong Airport (PVG) and the Port of Shanghai remain open, landside infrastructure and transport links will be severely limited by trucking restrictions and driver testing requirements. While some FCL trucks are still operating, there will be a significant impact on LCL cargo, as LTL trucks are not allowed to enter Pudong. Several logistics companies in the area have suspended operations and will not accept cargos during the lockdown. In addition, inspection services will be suspended at PVG until April 1.
Other cities in China are also suffering trucking bottlenecks due to the COVID restrictions, including Beijing, Shenzhen, Jiangsu, Qingdao, and Hong Kong. Yard productivity has been severely impacted by the cargo disruption, particularly at Yantian and Qingdao. In addition, container freight stations are still either not operating or are working at reduced capacity due to a lack of staff, further disrupting the flow of goods, with LCL shipments especially hard hit.
In the meantime, we recommend clients use Ningbo Port or Ningbo Lishe International Airport (NGB) to avoid disruption, especially for LCL shipments.
The lockdown may well be extended beyond April 5 if the situation continues to deteriorate. If that happens, the slowdown in demand would likely lead to downward pressure on spot rates in the short term, followed by a surge in volumes and upward pressure on the spot market.
OCEANAIR will continue to monitor to the situation and provide additional information as it becomes available.
