China’s New Covid Surge Cripples Important Global Factories & Ports

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  • Freight booking cancellations are increasing at the ports of Shanghai and Shenzhen as “factories cannot operate properly due to a lot of workers getting Covid.”
  • Congestion is also building off of the Ports of Ningbo and Qingdao as well, per Chinese logistics company HLS.
  • Logistics managers are warning of very soft volume after the Lunar New Year with canceled or delayed bookings for the 2nd half of January and early February.

The surge in Covid-19 cases in China is impacting the completion of manufacturing orders, according to CNBC Supply Chain Heat Map data.

Unrelenting demand collapse

Logistics managers are warning clients that because of the spike in infections, factories are unable to complete orders — even with U.S. manufacturing orders from China already down 40% due to an unrelenting demand collapse.

Orders for ocean bookings continue to be softer according to SONAR Data.

With 1/2 or even 3/4 [of the] labor force being infected and not able to work, many China manufacturers cannot operate properly but produce less than their optimal outputs,” Hong Kong-based shipping firm HLS wrote in a note to clients.

The container pickup, loading, and drayage (trucking) are also affected as all businesses are facing the impacts of COVID. We expect a very soft volume after the Lunar New Year because a lot of factories have slowed production due to the increasing infection and must cancel or delay the bookings for the 2nd half of January and also early February.”

HLS also noted that “All indications that the Chinese cities are experiencing infection peaks is based on the surge of infected family members, friends, and colleagues, the long lines at the fever clinics at hospitals across the country.”

Cancellations increase at Sanghai

Three major ports across China are experiencing supply chain delivery problems because of Covid, according to the note.

For the Port of Shanghai, the world’s number one container port, the report warned that “Cancellations are increasing as many factories can’t operate properly due to a lot of workers getting infected with Covid.”

The same warning was also highlighted for the Port of Shenzhen, the fourth-largest container port in the world and the city that is home to Apple manufacturers. “The booking cancellation is increasing as many factories can’t operate properly due to a lot of workers getting invested with Covid,” the report said.

Qingdao cannot ensure normal production

Qingdao, the sixth-largest port in the world, is reported as having factories with only “1/4 labor force and cannot ensure normal production.”

This data falls in direct contrast with reports from Chinese state media, which have looked to reassure the public that the outbreak is under control. The accuracy of data being released by the China CDC has come under increasing scrutiny around the world.

Factory orders are down between 30%-40%, which you would think would help in the completion of the products,” said Alan Baer, CEO of OL USA. “This is not happening in some areas of the country which is troubling. Then you have to factor in the additional Covid surges after Chinese New Year. Q1 will be challenging.”

As a result of the Covid impact on trucking, MarineTraffic is seeing a slowdown in port productivity in Shanghai.

Read more here.

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Source: CNBC