New lockdowns in China, concern for more supply chain turmoil

03.15.2022

Several cities on the east of China were placed in lockdown over the weekend due to a new outbreak of the coronavirus. Among the cities are Shenzhen and Changchun. In Shanghai, a partial lockdown was implemented. According to Container xChange, t​​he supply chain must prepare for "turmoil "in the coming months.

Although there is no clear sign of a halt on operations at ports or terminals, the supply chain analyst expects that lockdowns in China will reduce capacity and cause a surge in already inflated shipping prices. «The shockwaves will be felt across the US and America, and almost everywhere in the world», said Johannes Schlingmeier, co-founder and CEO of Container xChange.

The prices of sea freight usually reflect on the entire supply chain, thus also affecting rail freight.

War in Ukraine

The lockdowns come at a time when the rail freight corridor between Europe and China already faces challenging times. The war in Ukraine is having a large impact on the cargo volumes on the corridor, as many shippers and transport companies currently refrain from transiting through Russia, a country hard to avoid on the landbridge route.

According to Container xChange, this impact does not yet show in container prices. «So far the impact of the war on container prices is limited», the company says. But soon, high-value cargo from the rails will be pushed to ocean freight, and this will result in a capacity crunch. Add to this the impact of the lockdowns, and you will see «a major shockwave to an already crippled supply chain», the analysts explain.

This impact must be seen in the wider context of the last two years, it adds. «The immediate impact of this (war in Ukraine) on the overall supply chain has not started to show, not ignoring the fact that the Russian importance on global trade is not big enough for the containerised cargo to really disrupt the supply chains. We see on the other side, the container prices at record highs, containers piling up and a massive shortage as well. This is a result of many more other disruptions over the past two years since the pandemic started», Schlingmeier pointed out.

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