The closure of Shanghai Covid “will have an international impact on almost all trade”


The speed of closure in Shanghai and other Chinese cities is putting intense pressure on transportation and transportation across the country, which exacerbates the economic downturn of the government’s commitment to its zero-covid policy as cases continue to rise to record highs.

The disruption has mainly affected the freight industry, which plays an important role in transporting goods between cities and to some of the world’s largest ports, but is now subject to severe restrictions on drivers and service deliveries with positive cases.

“Freight transport is the main issue we have,” said Mads Ravn, Managing Director and International Head of Freight Purchasing at DSV, one of the world’s largest freight forwarding agencies. He added that booking truck services was almost impossible and that flights to Shanghai Pudong Airport were only 3 percent of the price last month, as air freight was limited to essential goods such as medicines.

“Basically, everything else is not moving, but Shanghai is being referred to other parts of China. It affects every product you can think of, “he said. “It will have an international impact on almost every business.

China is struggling with its worst coronary heart disease epidemic since it first arrived in Wuhan more than two years ago. Shanghai announced nearly 20,000 new cases on Thursday, a record in the city.

Maersk, the Danish shipping company, warned in late March that the city’s closure measures would reduce freight services to and from Shanghai by 30 percent.

But since then, restrictions that were originally supposed to split the city in two before the abolition of the nine-day closure have grown more serious and surrounded the entire city at once. It is unclear when the operations will be relaxed.

The Danish shipping company Maersk had warned that Shanghai’s closure measures would reduce freight services in and out of the city by 30% © Qilai Shen / Bloomberg

The measures, which in Shanghai have led to a number of complaints about difficulties in obtaining food when drones inspect empty streets, have also become more widespread in China, where officials have struggled to contain a worsening epidemic. Nomura, the Japanese bank, estimated this week that 23 cities and almost 200 million people were completely or partially closed.

“These figures could significantly underestimate the overall impact, as many other cities have been mass-testing district by district and mobility has been severely restricted in most parts of China,” said Ting Lu, China’s chief economist at Nomura.

Bo Zhuang, an Singapore-based analyst at Loomis Sayles, said: “Many access points on the highways between districts are closed and there has been no co-ordinated effort between the various provincial governments to alleviate the supply chain crisis.”

Express delivery companies in Anhui and Jiangsu provinces, both in the east of the country and near Shanghai, told the Financial Times that parcels could not be delivered to any area reporting incidents on the spot, including Shanghai.

Orders from Taobao, an online market popular with Chinese consumers, were delayed due to closure measures.

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Apart from domestic disruptions, experts warned that any domestic bottlenecks would eventually lead to delays in shipping due to the accumulation of goods and orders – and that the associated costs would surface when the operations were finally released.

“When Shanghai reopens, it’s the déjà vu of history we’ve seen so many times,” said Lars Jensen, CEO of Vespucci Maritime, a consulting firm. “There will be an increase in volume and upward pressure on substitution.

The latest economic data on Wednesday indicated the impact of a recent increase in controls, with China’s Purchasing Manager Caixin’s services index showing the worst month-on-month decline in March since early 2020.

There is no evidence of unusually long queues of ships outside the world’s largest port in Shanghai, which authorities said operates a “closed loop” system where workers did not leave their work area after the shift ended.

But cargo through the port tracked by FourKites, a supply chain data group, had fallen by about a third since March 12, when importers and exporters changed freight rates.

China Daily, a state-run newspaper, said goods were increasingly being shipped by sea to Shanghai because many neighboring cities had prevented truck drivers from entering.

Maersk said last week that it could provide services by “barge or rail as other solutions for the corridor between Shanghai and nearby cities.”

But Bo Loomis Sayles said this was only a “temporary solution” because as the virus spread to more cities and provinces, these channels would probably also be shut down by closure measures.

Additional reports by Wang Xueqiao in Shanghai, Nian Liu in Beijing and Andy Lin in Hong Kong

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