Zero Covid policy and Lunar New Year causing backlogs in China, impacting global supply chains

Tue 25 Jan 2022
Posted by: William Barns-Graham
Trade News

china trade policy

A combination of China’s zero-Covid policy and the upcoming Lunar New Year holiday has seen backlogs building at ports with possible knock-on effects for global trade.

Although China’s ports are open, some shippers have suspended services due to the impact of mandatory quarantines and testing requirements.

Diversions

Covid cases have been reported in the port cities of Shenzhen, Tianjin and Ningbo, as well as the industrial hub of Xi’an, sparking lockdowns and other curbs. The cities of Beijing, Dalian and Anyang have all recorded cases.

Shippers keen to avoid Ningbo congestion have diverted cargo to Shanghai, creating congestion at the port and resulting in an 86% increase in blank sailings, where ships skip a port, according to analysis from supply chain visibility platform project44 reported in Container News.

Delays and price rises

City AM reports that shipment delays from China to Europe increased to 1.65 days in 2021, up 172% compared to 2020.

project44 figures show delays from China to US West Coast ports up by 114% to 2.46 days, over the same period. 

“As shippers rushed to meet the ballooning demand for consumer goods throughout 2021, everything from vessel capacity, warehouse space, driver capacity, to dock space buckled under the shift to a more Just-in-Case supply chain strategy,” project44 explained. 

Costly

Meanwhile, shipping rates from Asia to the US have risen by 4% and air freight rates have spiked by up to 50%, reports Freightos.

Although there have been recent reports of freight costs coming down, the latest Covid outbreaks in China left carriers struggling to maintain reliable schedules in December, reports Sourcing Journal.

Various strategies, including blank sailings and changing sailing schedules, have not proven as successful as carriers had hoped.

Olympics priority

Tackling Covid ahead of next month’s Winter Olympics has also become a key priority for China, Atul Vashistha chairman of supply chain consultancy Supply Wisdom, told CNBC.

“Products are piling up while ships are banned entry. Between negative PCR-test requirements and last-minute re-routing, 2022 is starting off like 2021 ended – chaos,” Vashistha said.

'Not sustainable'

Prof Jin Dong-yan of Hong Kong University’s School of Biomedical Sciences has told the Guardian that China’s zero-tolerance policy for Covid is “not sustainable”.

“[The] detection of Omicron variant in many cities in China including Beijing shows how difficult it could be to maintain the zero Covid policy,” he said.