New China Covid Devastate Supply Chains

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Credit: Martin Sanchez/Unsplash

The most recent interruptions to China’s supply chains are labour shortages and industrial closures brought on by virus outbreaks, which followed a relaxation of the country’s Covid regulations, as reported by The Loadstar.

Struggling to cope

Hospitals around the country are “struggling to cope” as a result of the abrupt change of heart on zero-Covid, according to the SCMP.

According to Alice Tang, ITS Cargo’s China-Europe land transport planner, the virus has “spread incredibly fast” during the previous several weeks.

One forwarder in China reported that more than 50% of their coworkers were absent due to illness, our partner in Xinjiang reported that 70% of their employees were diseased, and today I called various manufacturers and they reported the same, she told The Loadstar.

“As a result, a lot of manufacturing and logistical firms have chosen to begin the holiday season early.”

Scarcity of supplies

“For instance, a holiday lasting up to two months was announced by certain textile manufacturers in Zhejiang. 60% of businesses in Guangdong, Zhejiang, and Shandong will shut down by the end of December.”

She added that domestic courier services in China were also backed up: “Parcels are reportedly building up on Beijing’s streets. Plastic bags of ordinary items are stacked high in supermarkets, waiting to be delivered by couriers.”

A scarcity of supplies from suppliers may also compel certain manufacturers to shut down output, according to Zencargo.

“And truck drivers being sick from the coronavirus could seriously disrupt supply lines, the forwarder continued.”

Orders lower than usual

The one bright spot is that China’s orders are much lower than usual for the season because destination markets are winding down for Christmas. For instance, exports to the US decreased 25% year over year in November in terms of US dollars, while forwarders reported that December had been “extremely quiet.”

Dropping ocean freight rates have also been a reflection of this, albeit, according to the most recent update from Linerlytica, carriers have temporarily been able to stop the rate decline.

Lowest weekly declines

“Capacity management measures to address the fall in container freight rates are helping to moderate the rate declines,” according to Linerlytica. “The SCFI saw its lowest weekly declines since July. More work must be done to stop the decrease, though, as temporary blanked sailings have not been able to stop the rate slide and capacity withdrawals are only being made for smaller services that have not had a significant effect on the overall supply-demand mismatch. Given that there have been 70% fewer early contracts signed compared to last year, carrier reticence to commit to longer-term capacity decreases will continue to impact rate prospects in 2023.”

 

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Source: The Loadstar

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