Covid outbreaks in Shanghai and Shenzhen, so far, have not caused yet another major supply-chain disruption, though some impacts are being felt, according to cargo marketplace Freightos.
Shanghai has avoided a lockdown, though restrictions are still evolving. Ocean logistics remain unimpacted, though road transport – especially in or out of the region – is becoming complicated.
Passenger flight restrictions as well as decreased capacity and higher fuel costs caused by the war in Ukraine continue to push Shanghai cargo rates up. Freightos Air index (FAX) Shanghai to N. Europe rates climbed 4% to $8.66/kg last week, a 39% increase compared to the end of February.
Shenzhen’s full lockdown began on March 14th, closing manufacturing and warehouses, and limiting trucking availability because of driver quarantines and restrictions on entering or exiting the region. The closure was lifted by the start of this week as planned, and several districts even re-opened early.
Most importantly, despite the lockdown area ports remained operational avoiding any significant backlogs like those seen during the outbreak at the port of Yantian in May. There are reports of some reduction in port productivity due to labor impacts, trucking availability, and a drop in available exports due to factory closures. The resulting uptick in the number of waiting ships and the expectation that trucking will take longer to recover has led Maersk to omit some Shenzhen area port calls.
Last year the Yantian closure sent ocean rates spiking by 20%. But so far, the added delays and congestion that could push rates up – or at least prevent them from falling – have not been severe enough to do so.
Inflation caused by climbing oil prices and made worse by the war in Ukraine appears to be curbing European demand for imports. Rates from Asia-N. Europe have declined 17% since the end of January. The outbreaks in China have not stopped that trend as prices fell 6% since the start of the lockdown to $12,564/FEU, its lowest level since July. Capacity taken up by growing congestion at European hubs and rail to ocean conversions caused by the war have likewise not stopped the rate slide, with some carriers already reducing capacity in response.
Transpacific rates also fell slightly this week to $15,908/FEU to the West Coast, but are within 6% of the $15k/FEU neighborhood they’ve been in ever since the close of peak season in November.
While the temporary dip in available supply of exports could explain the slight easing, all signs point to continued elevated volumes and rates in the coming months. This strength – despite the disruptions in China and initial signs that inflation and some return to spending on services could start curbing demand for imports – may point to importers pulling some demand forward to avoid the delays experienced during peak season last year and to get ahead of a possible West Coast dock worker strike in July.