What are the consequences of China’s COVID-19 measures on shipping costs?
Kemiex said its network members are observing the logistics dynamic closely. “Despite the biggest lockdowns in China since 2020, higher fuel prices and disruptions stemming from Eastern Europe war and sanctions, none of the recent worst-case predictions of shipping rates spiking has occurred,” noted Stefan Schmidinger, partner at that Swiss market intelligence firm.
Last year, freight rates surged considerably when the busiest of South China ports – Yantian, Shekou and Nansha - were under lockdown, causing a ripple effect throughout global supply chains, he commented.
The past few weeks have more seen road transport delays, challenges with container availability and some reduction in port productivity in China stemming from quarantines, testing and other local measures, said the Kemiex representative.
“Container freight rates have been sliding sideways, if not lower, for many routes and over the past weeks. We’ve even had a few reports of sea carriers removing some capacity or omitting port calls. Consultants are attributing better rates to shipping capacity freed from Russia trade and lower import demand from Western economies amid inflationary pressures. The freight situation however could escalate any day.”
China has reported more than 56,000 cases of the virus nationwide this month, with the outbreak in Jilin, which is currently under lockdown, accounting for most of them, noted Sky News.
Shanghai, a key financial hub, has been hit with ‘zero COVID’ measures in the past 24-hours as Chinese authorities seek to carry out testing amid what they perceive to be a surge in COVID-19 cases.
The city is seeking staggered restrictions, with the eastern side of the city under lockdown since yesterday until April 1, and the western side closed off from April 1-5. Public transport is suspended while business and factories must pause operations or work remotely, according to officials.
According to shipping company, CMA CGM, Shanghai port terminals are operating normally but there are reports of delayed trucking services into and from Shanghai due to the local restrictions. There are no issues with barge and train services, reported the logistics firm.
Feed additive output
Manufacturing and supply of feed additives is, overall, functioning, said Kemiex. Some companies in China are being told to switch operations to isolated closed loop management systems, comparable to the COVID-19 security schemes during the recent Winter Olympics, whereby workers eat, sleep and work in ‘bubbles’ so that factories can remain open.
“In a nutshell, operations are more complex to handle yet intact," Schmidinger said.
The markets are keeping an eye, though, on the COVID-19 crisis management and policy of the Chinese authorities given that further lockdowns could lead to worsening economic activity.