Delays at Shanghai ports mount: new blow to supply chain

What is happening in Shanghai?

This is how confinement is lived in the city 2:59

(CNN Business) ––

The strict confinement in Shanghai, China, due to a resurgence of covid-19 now increases the pressure on global supply chains.

Shanghai on Friday extended restrictions in many parts of the city, which is home to China's financial hub and one of the world's busiest ports.

In fact, the port of Shanghai had already suffered major delays.

So expanding measures against covid-19 can worsen congestion and further increase transport costs, according to experts.

• Panic in the supermarket as Shanghai orders the confinement of its citizens

Earlier this week, the coastal city imposed a two-phase lockdown on its 25 million residents.

The authorities closed the western part of Shanghai on Friday and extended the confinement in the neighborhoods of the eastern part with positive cases for up to nine days.

Effects of the confinement in Shanghai

There are 25 million people confined in Shanghai due to the resurgence of covid-19 0:45

These restrictions have caused significant delays at the port, located in the eastern part of the city, which was already congested.

It is the busiest container port in the world: it handles four times the volume that arrived at the port of Los Angeles in 2021, according to data from the port authorities of both cities.

VesselsValue, a global shipping data provider, said the number of vessels waiting to load or unload at the port of Shanghai has soared to more than 300 this week.

The figure represents an increase of almost five times more than in the last two and a half weeks.

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"Congestion in Shanghai tends to be worse at this time of year. However, the recent increase is much higher than both last year and the season," the company said in a statement on Tuesday.

• Why global supply chain disruptions keep getting worse

It is not yet clear what impact the lockdown will have on the buildup of ships at the port, the company said.

But he suggested that supply chain managers and analysts around the world should "start planning for the effects of the fallout".

Warn about rising costs

Maersk, a major container shipping company, has also warned that the lockdown in Shanghai may cause shipping delays.

In addition to higher costs.

"Transportation service in and out of Shanghai will be seriously affected by 30% due to the total closure of the Pudong and Puxi areas," Maersk said in a notice to its customers on Monday.

Shanghai is separated into two parts, Pudong and Puxi, by the Huangpu River.

This is how supermarkets looked after panic buying in Shanghai 0:54

"As a consequence there will be a longer delivery time and a possible increase in transportation costs," he added.

For its part, the city government has said that cargo loading operations will continue as normal despite the lockdown.

The Shanghai International Port Group, which runs the port, said last month that it would implement a "closed-loop system," which requires employees to stay in specific areas and adhere to certain protocols to prevent the spread of the coronavirus.

• China's economy suffers a double hit in March

However, due to travel restrictions, long waits at checkpoints, testing requirements and possible quarantine upon return, many truckers have struggled to get cargo containers to the port on time. according to the state media outlet

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a global problem

Congestion in Shanghai is bad news for consumers and businesses around the world.

"Shanghai's city lockdown is a setback for the global supply chain, already affected by geopolitical tensions," Bansi Madhavani, chief economist at ANZ Research, wrote in a report on Friday.

The global supply chain has been under pressure for months due to the covid-19 pandemic and the Russian invasion of Ukraine.

Although the Shanghai port continues to operate, activities such as warehousing and staffing will be affected, causing delays, Madhavani said.

And he added that transportation between countries could also face obstacles.

Videos show panic buying in Shanghai due to strict confinement 2:30

"These restrictions could... drive up cargo prices," Madhavani said.

Nomura analysts also anticipate "additional sea freight delays, port congestion and lack of logistics capacity" as Shanghai remains in lockdown.

"Until now, markets have underestimated the seriousness of the situation in China," Nomura analysts noted in a research note on Thursday.

"Over the next two months we expect global investors to better reflect this impact in their asset valuations."

supply chainCovid-19Shanghai