The supply chain crisis that has dominated logistics for much of the pandemic started with a lull. In the first half of 2020, factories closed, shipping rates slumped, empty containers were stranded at ports, and humming ocean trade was replaced by blank sailings—when a shipping company decides it’s not worth it to sail a ship on a scheduled route.
Two years later, shades of the early pandemic supply chain are emerging again—halted factory operations, declining shipping rates, and blank sailings—as China contends with its biggest covid outbreak since the start of the pandemic with harsh lockdowns and quarantine measures. Shanghai, a city of 25 million and one of China’s largest manufacturing and export hubs, is under an indefinite citywide lockdown.
Logistics operators are worried that like 2020, today’s calm will be followed by chaos once lockdowns are lifted and the pent up-stock in factories and warehouses in China turns into a flood of goods bound for the US and Europe.
Lockdowns are snarling trucking in China
China has not closed its ports, as it did during covid outbreaks in 2021. Instead, its quarantine measures inland are resulting in some factory closures and a critical shortage of willing truck drivers to move goods from factories to warehouses to ports. Shanghai, which is under a citywide lockdown that is causing food panics and quarantined apartment-block residents to scream from their windows en masse, are also requiring truck drivers to take covid tests before being allowed to enter the city. Some drivers, according to the Wall Street Journal, are avoiding Shanghai altogether for fear that they will end up in quarantine. Likewise, some cities are reluctant to let truckers from Shanghai in, according to the Loadstar, a shipping industry outlet.
According to the Freightos container freight index, rates are down 5% to $9,280 per container, between March 12, when lockdowns started in Shanghai, and April 8. Some routes are posting larger declines, like a 9% drop between Europe and China. (Other routes, like Europe to South America are seeing prices spike, as much as 10% over the last week.)
However, one freight forwarder told the Loadstar that they can’t take shippers up on the lowered prices if they can’t get their goods out of the warehouses and onto a ship. With too little cargo, shipping lines are preparing to announce more blank sailings from Asia in the coming weeks.
According to data released on Friday (April 8) by FourKites, a Chicago-based company that tracks supply chain data, the volume of goods shipped by sea out of Shanghai has dropped 26% between March 12—authorities have been carrying out targeted lockdowns since early last month—and April 4. The volume of goods leaving the port by truck dropped 19% in the same time period.
One logistics professional told the Loadstar that the build-up in demand for shipping will be “unleashed once the factories reopen.” A rush of goods will need to be shipped, there won’t be enough containers in China’s ports to pack them all into, and prices will go up, once again disrupting a supply chain that had barely begun to recover from the pandemic’s chaos.