China’s Covid-19 explosion threatens backlog at busy Shenzhen port

Cargo ships are piling up at one of China’s busiest ports after another Covid-19 outbreak shut factories and warehouses in Shenzhen, raising the prospect of a new round of congestion. can slow down freight rates and deliveries.

According to shipping brokers, there are more than 35 ships waiting to dock in Shenzhen and another 30 in northern Qingdao. The port of Shenzhen, which serves a major manufacturing and export hub, includes the Yantian terminal, which handles about a quarter of China’s total exports to the United States. Shenzhen is still open, but most manufacturing plants and warehouses were ordered to close last week, and container shipments are falling rapidly as fewer trucks arrive.

“I had a bunch of bicycles, but got stuck 16 kilometers on the highway to get to the port for almost two days,” said Wei Wu, a trucker who delivers packages to a logistics and container operator in Europe. said. “Very little movement in Shenzhen. You need to check multiple times, and I don’t know if the train is allowed in or not.”

Qingdao, pictured in this February, is one of China’s ports where ships are waiting to dock.


Costfoto / Zuma Press

The lockdown in Shenzhen was partially lifted on Friday after President Xi Jinping told a Politburo meeting that while adhering to the zero Covid-19 policy, the government should “minimize the impact of impact” of the pandemic on the country’s economy.

The Shenzhen government said on Friday the city of more than 12 million people had resumed operations at some factories along with public transport services.

A Covid-19 outbreak closed the Yantian terminal for nearly a month in June, creating a backlog of tens of thousands of containers while dozens of trains waited for weeks outside Shenzhen to load. Operators diverted some ships to other ports, which eventually returned to the Pacific and created congestion at the California ports of Los Angeles and Long Beach.

The outbreak in Yantian has cut operations at that station by about 75%, according to transit brokers. Daily rates across the Pacific have risen by a quarter during the lockdown as shippers try to find ships that call other Chinese ports and move their cargo.

Freight forwarder Seko Worldwide said in a report last week that there were restrictions on trucks entering and leaving Shenzhen, and that trucks from Shenzhen to Hong Kong had stopped operating, except for essential items. weak to Hong Kong.

It said truck restrictions also remained in Shanghai, the world’s largest port, with some ships transferring to Ningbo.

Hong Kong has faced a record increase in the number of Covid-19 infections and the highest death rate in the world, prompting authorities to impose strict restrictive measures. The WSJ’s Diana Chan reports on how everyday life has changed in the city, from panic shopping to the exodus of residents. Photo: Emmanuel Serna / Zuma Press

Danish air freighter AP Moller-Maersk AS said that although the ports in Shenzhen were operating, the company had contingency plans in place and could divert ships if Covid restrictions were to come. -19 is still there.

Kuehne & Nagel International AG

, a logistics operator based in Switzerland, said that in some cases it has switched drivers for trucks bound for Shenzhen to avoid delays due to intercity shipping restrictions. It said ships are waiting an average of three and a half days to dock at Yantian.

Last week’s freight rates from China to Los Angeles were flat from last week at around $16,242 per container, according to the Freightos Baltic Index, but they are still near record levels and have more than tripled over the same period. last year.

Standby outside the ports of Los Angeles and Long Beach, the nation’s two largest gateways, was 48 ships on Thursday, down from a record 109 in early January, according to the Marine Exchange of Southern California. Port of Los Angeles CEO Gene Seroka said he expected a new influx of ships in the coming weeks.

Analysts say that if ports in China remain open, the halt in production will free up some backlogs waiting to be unloaded. But with warehouses closed, finding space for incoming containers will be difficult.

“All things considered, the impact now – obviously not as big as it was last year,” said Lars Jensen, managing director of Vespucci Maritime, a Denmark-based consulting firm. “Let’s hope it doesn’t get any worse than this, but China’s Covid zero tolerance and the Omicron variant is not a satisfying combination.”

The latest outbreaks have hit major manufacturers including Foxconn Technology Group, a supplier to Apple Inc.,

Toyota Motor Corp.

and Tesla Inc.

production cuts.

China’s moves to contain the outbreak will determine the impact on the global supply chain. About half of China’s exports are produced in regions dealing with the Covid-19 epidemic, and three-quarters of its exports are shipped from these regions.

On Wednesday, Taiwan-based Foxconn said it may restart some operations at its Shenzhen facilities, where workers live in dormitories alongside assembly lines. Tesla, which makes the Model 3 sedan and Model Y sport utility vehicle in Shanghai, told employees and suppliers it would stop production last Wednesday and Thursday.

United Parcel Service Inc.

issued a service warning. The company’s website says pick-ups and deliveries have been suspended in Shenzhen and Dongguan, while in Zhejiang province and elsewhere, imported items will be halted for four to seven days to protect born.

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