Though Shenzhen’s manufacturing and logistics continue to recover after the city’s lockdown ended last week, what started as targeted restrictions in Shanghai have now progressed to a full lockdown.
The closure in Shanghai will be in two phases – the city’s eastern side will lockdown until Friday and then the western side will close from April 1st to the 5th, according to cargo marketplace Freightos. This strategy – which like in Shenzhen will keep ports open – aims to minimize disruptions to manufacturing and trade. The recent example at Shenzhen suggests that with ports open the impacts will likely not be as severe as the shutdown of Yantian a year ago which created a significant backlog and sent ocean rates spiking.
But even with the world’s largest port open (and factories that create a “bubble” for workers allowed to operate too), the closure of many warehouses, the drop in manufacturing and the serious disruption to trucking in, out and within the city are expected to cause a significant drop in the availability of goods and port output.
The dip in available exports is already leading some airlines to cancel flights out of Shanghai.
Freightos.com marketplace data shows Shanghai-U.S. air cargo rates have climbed about 10% in the last two weeks, though the combination of lower demand and removal of capacity could keep air cargo rates level.
And though ocean carriers haven’t announced plans to skip Shanghai’s ports yet, some volumes could shift to nearby Ningbo. Destination ports in the U.S. and Europe could expect some lull in volumes in the coming weeks followed by an increase that would be another challenge to already congested ports.
Ex-China ocean rates went largely unchanged this week, Freightos reported, though a slowdown in available goods normally will drive a dip in ocean rates before a rebound. An inflation-driven decrease in European demand for imports, however, had Asia – N. Europe prices – even with worsening congestion at major European hubs – falling even before the disruption to available goods. Since the end of January, Asia – N. Europe rates have decreased 20% to $12,050/FEU – the lowest level since July. So it’s unlikely a lull and surge of containers will impact Asia – Europe rates significantly.
In the U.S., any additional delay will be unwelcome for many importers. The relative stability (though still extremely elevated level) of transpacific rates since Lunar New Year may point not only to sustained consumer demand, but also to retailers pulling some summer demand forward. Many U.S. importers are rushing to avoid peak season delays as well as the prospect of even more West Coast disruptions this summer as a key port worker’s union contract will expire at the end of June.
- Though ports remain open, two-phase lockdown in Shanghai is significantly impacting the availability of goods as manufacturing and warehouses close, and trucking availability is significantly disrupted.
- Some airlines are already canceling flights out of Shanghai, and Freightos Data shows Shanghai – U.S. rates have climbed 10% in the last two weeks.
- With ports operational, the impact is not expected to be as severe as in Yantian a year ago, though a significant slowdown is expected nonetheless.
- A lull and surge in available goods will typically drive some dip in ocean rates before a rebound. But in Europe, the inflation-driven decrease in demand has pushed Asia – N. Europe rates down by 20% since early this year to their lowest level since July, and the Shanghai disruption is unlikely to break that trend.
- Transpacific rates have been high but stable since Lunar New Year and may point not only to sustained consumer demand, but also to retailers pulling some summer orders forward to avoid peak season delays and the looming July expiration of a key West Coast port worker’s union contract.
- Asia-US West Coast prices (FBX01 Daily) fell 1% to $15,811/FEU. This rate is 168% higher than the same time last year.
- Asia-US East Coast prices (FBX03 Daily) increased 2% to $17,638/FEU, and are 205% higher than rates for this week last year.