Get Ready For The Next Supply Chain Shockwave

Concern is growing that the spread of COVID cases and city lockdowns in China will have massive downstream effects for global supply chains that could dwarf previous disruptions since the start of the pandemic.

Last May, the huge Yantian container terminal at the Port of Shenzhen throttled down to 30% of normal productivity for a month to stamp out a handful of positive cases there. Hundreds of thousands of shipments that couldn’t enter the port accumulated in factories and warehouses, and many vessels skipped the port to avoid waiting seven days or more at anchor. It took weeks after the port reopened to clear the cargo backlog. The effects cascaded to the U.S. and Europe, resulting in port traffic jams, transit times triple the norm and missed retail deliveries for the holidays.

The difference this time is that an entire metropolis — and highly interconnected global trade center — is essentially shut down. Not since the initial 2020 COVID-19 outbreak in Wuhan have lockdowns been this extensive in China.

“It’s probably worse than Wuhan,” said Jon Monroe, an ocean shipping and supply chain expert who runs a consulting firm. “You’re going to have a lot of pent-up orders. It’s going to be an overwhelming movement of goods” that will drown shipping lines and ports once the lockdowns are lifted.

Freight is piling up

Twenty-five million people in Shanghai have been sequestered for 18 days. Chinese authorities this week slightly eased the restrictions, dividing the city into three categories based on previous screenings and risk levels. People can wander outside their apartment buildings but are encouraged to stay home in neighborhoods with no positive COVID-19 cases in the past two weeks. Those in high-risk areas must still shelter at home. – READ MORE