As firms reopen there will be a rush to purchase raw materials, and then a flood of finished goods leaving factories as companies try to make up for lost time.
iStockWhile the lockdown of Shanghai is slowly being lifted, the effects on production and supply chains will likely be felt for months.
Daily operations at Shanghai’s port have almost fully recovered from the effects of the city’s Covid-19 lockdown, though the backlog from disruptions to the port and nearby factories will likely continue to cause shipping congestion well into the year.
Daily container throughput -- a measure of cargo handling activity -- at Shanghai port has rebounded to 95.3% of the normal level, Ministry of Transport official Li Huaqiang said Thursday, according to Chinese state media. Cargo throughput at major Chinese ports between May 1 and May 24 was up 4.2% from the same period in April, but down almost 1% compared to 2021, he said.
However, the improvement in the port hasn’t been accompanied by a rebound in trucking, as a shortage of drivers and vehicles continues to hamper the delivery of goods to and from the port. Road freight traffic indexes for Shanghai were 81% lower in the first three weeks of May compared to 2021, after a drop of 84% in April, according to G7 Connect, a Beijing-based fleet management company.
While the lockdown of Shanghai is slowly being lifted, the effects on production and supply chains will likely be felt for months. As firms reopen there will be a rush to purchase raw materials, and then a flood of finished goods leaving factories as companies try to make up for lost time.
There is already a backlog of cargo equivalent to 260,000 twenty-foot containers which wasn’t shipped from Shanghai in April because of the lockdown, according to Drewry Shipping Consultants, and the rebound will have a “bullwhip” effect across supply chains.
“The Chinese lockdowns are hitting a global container distribution system that is already severely stressed and facing reduced capacity due to pervasive congestion,” Drewry said in a recent report. “Even if lockdowns were to end today, the predictability and capacity of the container distribution system would be jeopardized during summer peak season.”
(With assistance from Sarah Chen, Yujing Liu, Fran Wang and Ann Koh)
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