Just like the Sean Penn-Madonna flop, the newest “Shanghai Surprise” is also a bomb.
China’s latest move announcing a phased-in exit of the lockdowns for the eastern part of Shanghai has logistics managers warning clients about the impact it will have on the truck deliveries of their products to both the airport and seaport.
With the military moving in to test millions of civilians, the government of China is showing the world “zero COVID” is a policy it is not abandoning anytime soon.
On the heels of the massive testing measures closing down Shanghai, a city just south (Zhejian Haining) has shut down temporarily, launching a Level 1 emergency response, according to the WeChat public account of Haining Release. A strict three-zone management and control of sealing, control, and prevention is underway; meanwhile, schools and businesses will be closed, and Intercity rail, buses, taxis, and long-distance passenger cars will be suspended.
Steve Lamar, CEO of the American and Apparel and Footwear Association, told American Shipper that this area is a hub for garment and apparel manufacturing.
A spokesperson for Orient Star Logistics explained that “the COVID test measures and the restrictions reduce the truck supply. Yet, the bigger issue that we are facing is the restrictions for truck drivers going to surrounding provinces for cargo pickup. The local government checks the driver’s route of the previous weeks and would reject the entry if the driver visited any alerted area.”
Logistics black hole
This lack of clarity is creating a black hole in logistics planning.
In a recent note to clients, Worldwide Logistics wrote the situation is “still developing” with no reopening schedule announced.
“The extent to how the production and shipping plan is to be affected hinges upon how long it will take to get this outbreak under control,” the note explained. “And obviously, we expect to see Chinese exporting volume may drop by around 30% in the following weeks, which will put downward pressure on the market spot rate. More freight of all kinds of space has been released by carriers to fulfill the vessel for the time being.”
The Pudong New Area, Fengxian, Jinshan and Chongming districts as well as parts of Minhang and Songjiang districts are included in this new phase in the plan.
Crane Worldwide Logistics alerted its customers of the hesitancy of cities to allow in drayage trucks from Shanghai. The company characterized the container drayage situation as “challenging” and airfreight as “almost impossible” because of the lack of labor.
Crane wrote that “there are not enough longshoremen in the port, so the efficiency for loading and unloading has been impacted. Both Waigaoqiao Port and Yangshan Port are congested.
“For import: Import vessels’ waiting time for berthing will be longer.
“For export: Some ocean carriers have announced vessel delays or are omitting Shanghai calling of some vessel/voyages, and some have announced blank sailings. A lot of clients have shifted to Ningbo port. Some carriers have started to allocate more space to Ningbo, but some have not actioned so swiftly.”
One step ahead of capacity
Keith Winters, CEO of Crane Worldwide Logistics, told American Shipper that given the fluidity of the situation, agility and flexibility are necessary.
“Different provinces may have restrictions on cargo movement, therefore our teams are communicating daily what is accessible while following the governmental guidelines set forth with current lockdown protocols,” Winters said. “Crane Worldwide has operations throughout China and our best advice is to keep communicating and stay one step ahead of your capacity needs as this situation develops further.”
Akhil Nair, VP of global carrier management and ocean strategy at Seko Logistics, also echoed the same challenges.
“Seventy percent of the Shanghai container business originates in other areas so drivers have to enter different regions, which means testing no older than 48 hours old is required,” Nair said. “With the lockdown, offices and warehouses are closed.
“Our CFS (container freight station) is closed from March 30 to April 5. This is a location where exporters drop off their products so they can be added to a container. These are small components which would normally not have their own container. With the CTS closures, these exports cannot be dropped off nor containers filled.”
The impact of these lockdowns and restrictions can be tracked by the amount of capacity waiting off port limits. MarineTraffic data broke out the capacity for American Shipper.
The disruption of these restrictions can be seen in the troughs. Shanghai’s waiting off-port limits capacity is the only port on an uptrend.
It’s important to remember logistics companies need to provide a realistic picture of the environment so their clients can plan. It doesn’t line their coffers with cash if they overblow a situation or undersell.
This line from Worldwide Logistics speaks volumes: “There is a clear signal that the whole city may be shut down if the situation doesn’t get better.”
So grab some extra popcorn — this horror movie may be the first in a double feature.
Watch: What the vessel backlog means in Shanghai
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