25 May 2022

SHANGHAI LOCKDOWN FURTHER DISRUPTS MARITIME SUPPLY CHAINS WARNS DREWRY

Maritime consultant Drewry published on 17 May a briefing on the potential consequences of the lockdown in the Shanghai region to global maritime supply chains. Drewry estimates that the lockdown has further stressed the global maritime supply chain which is currently facing reduced capacity due to pervasive congestion. However, the reduction in volumes could speed up the normalisation of liner network performance and port productivity, with port congestion easing in the US and Europe.

The first impact of the lockdown, when it started in mid-March, was the reduced availability of road hauliers to pick up inbound containers, limiting storage capacity at terminals. Other imports, as well as most export flows, were diverted to neighbouring ports like Ningbo and even Qingdao, but these ports were already congested themselves prior to this additional cargo influx. In reaction and in view of the increased waiting times before berthing, carriers reduced considerably port calls at Shanghai since mid-April. Drewry estimates that up to 260,000 TEU of export cargo was not shipped from Shanghai in April because of the lockdown. This is the equivalent of 26 fully loaded 10,000 TEU container vessels, which will have to be found somehow in future months, as supply chains are reactivated.

The greatest uncertainty is when China's lockdown restrictions will end, and the “bullwhip”/rebound impact this will have across the supply chain. Many factories will need first to replenish their inventories of raw materials, and then do a ‘cold re-start’. Also, liner shipping schedules will take at least one rotation to normalise. This would mean that even if lockdowns were to end today, the predictability and capacity of the container distribution system would be jeopardised during summer peak season. Therefore, Drewry expects that the Shanghai rebound is likely to add new capacity shortages due to an even more busier summer peak season.

Source: Drewry