The ongoing lockdowns in Shanghai threaten to cause further disruptions in the supply chain moving to the summer peak season with global shipping consultancy Drewry, also warning of new capacity shortages.
In a recent report, Drewry said the Chinese lockdowns are hitting a global container distribution system that is already severely stressed and facing reduced capacity due to pervasive congestion.
It noted that a positive reading of this situation could be that the reduction in volumes will speed up the normalisation of liner network performance and port productivity with port congestion already easing in the US and Europe.
"In Shanghai, where lockdowns started in mid-March, probably the most immediate impact was on road hauliers who found themselves having to quarantine 14 days before being allowed to exit the ‘infected area’ and return to the port’s hinterland. Obviously, this added significant cost to inbound containers that had already landed at the terminal and could not be evacuated," Drewry added.
"Other imports, as well as most export flows, were diverted to neighbouring ports like Ningbo and even Qingdao. Unfortunately, these ports were already congested themselves prior to this additional cargo influx."
Drewry said between the start of the lockdowns, the number of weekly port calls in Shanghai trended downwards by 2.5 port calls per week while at Ningbo and Qingdao the number increased by an average of resp. 1.1 and 0.5 per week — although the reduction in Shanghai port calls accelerated considerably since mid-April.
"This shows that despite the reduction in vessel calls, the seaside congestion worsened considerably at Shanghai following the lockdowns, peaking at 277 vessels in week 15," Drewry said.
It added that the increasing seaside congestion, in combination with a huge drop in export cargo volumes due to almost all factories in the Shanghai hinterland being shut, is likely what caused carriers to pull their ships out of the queue and call at Ningbo and Qingdao instead.
"The greatest uncertainty is when China's lockdown restrictions will end, and the 'bullwhip'/rebound impact this will have across the supply chain," Drewry said, noting that many factories will need first to replenish their inventories of raw materials and then do a 'cold re-start'.
It added that liner shipping schedules will also take at least one rotation to normalise.
"This would mean that even if lockdowns were to end today, the predictability and capacity of the container distribution system would be jeopardised during summer peak season."
"Not to mention the fact that once the Chinese manufacturing engine starts to heat-up, their port productivity is restored and liner schedules are back in form, boxes might get stuck at destination as those port and inland distribution systems crumble yet again," Drewry further said.
Strong peak season; capacity shortages
Drewry estimates that up to 260,000 Twenty-foot equivalent unit (TEUs) of export cargo was not shipped from Shanghai in April because of the lockdown.
"This is the equivalent of 26 fully-loaded 10,000TEU containerships, which will have to be found somehow in future months, as supply chains are reactivated," it said.
"Given that the summer peak season is normally busier, anyway, the Shanghai rebound is likely to support a strong peak season and new capacity shortages," Drewry added.