Shippers should brace for more supply chain disruption as China grapples with its worst COVID outbreak in months. Local authorities in dozens of cities – including Beijing, Shanghai, and Nanjing – have implemented strict control measures to contain the outbreak, including inter-city and cross-border travel restrictions, strict border controls, mandatory mass testing requirements, the lockdown of millions of people, and quarantine measures for those entering the country from high-risk countries.
The latest outbreak was traced to Nanjing Lukou International Airport, where cleaners were exposed to the Delta variant while disinfecting a plane from Russia. Over the last two weeks, the highly infectious variant has spread to at least 26 cities across 17 provinces.
Cargo owners, already stressed from devastatingly high shipping rates, ridiculous surcharges, and severe capacity and equipment shortages, will not only see their production and transport costs increase, but also their delivery schedules falling way behind.
Shippers should anticipate significant reductions in cargo capacity and soaring freight rates, as the new control measures have forced many airlines to cancel both domestic and international flights. Experts anticipate a challenging peak season, especially as the 14-day isolation requirement for overseas crews will likely lead to a pilot shortage.
Shippers should expect the market to tighten and rates to increase. Port operations will likely be impacted, and delivery schedules will come under pressure as vessels are forced to remain at anchor while authorities screen incoming crews. Many ports in the country are also requiring vessels to quarantine for 14 days if they performed a crew change withing 14 days or arriving in China and up to 28 days if the previously berthed in India.
The inter-city travel restrictions and quarantine measures will also significantly impact inland trucking availability. Drivers are now required to have a “green healthy code” in order to travel to other cities, and many will face 14-day isolation periods if they have traveled to any high risk area.
Shippers are advised to start making contingency plans now in order to avoid further supply chain disruptions. If COVID cases continue to escalate and wider lockdown measures are imposed, manufacturing output could drop by 15-20% for approximately one month. And, if it’s anything like 2020, port operations could by slashed by up to 70%, forcing carriers to reinstate the blank sailings experienced early on in the pandemic.