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Chinese lockdown continues to impact global supply chain

While China’s tech hub Shenzhen has emerged from its 7-day-long lockdown, China’s biggest city, Shanghai, home to the world’s largest container port, has remained open but with restricted flows in and out since March 28. The city is still under a citywide lockdown with a strict curfew enforced and road restrictions implemented across the city and outskirts. 

Beijing reported several new cases of infections with COVID-19 in multiple districts over the past days. Mass testing campaigns are underway right now and there are fears that the city could also be locked down.

On top of this, last week news was released that the spread to Chinese megacity of Guangzhou cancelled hundreds of flights and began testing 5.6 million people over one suspected COVID-19 case. 

Chinese ports are still open, but acceptance of dangerous and reefer goods is limited due to high yard density. Local trucking is severely restricted, warehouses and factories are still closed. Some manufacturers are slowly opening but under strict safety requirements.

As a result, import cargo is piling up in the ports, while urgently needed export cargoes cannot get to the pier.

One in five container ships is currently stuck at ports worldwide, with 30% of the backlog coming from China. Carriers are delaying cargo in transit but also those trans-shipment ports are heavily congested. Initially, it was possible to reroute containers via Ningbo, but not anymore due to congestion. For exports from the neighboring Jiangsu province shipping via Qingdao is a possibility.

Understandably export volumes have reduced due to the lockdown, as a result there is open capacity from some of the Far East Ports. Rates have also dropped on Asia – Europe trades, this is just temporary, though. Once the lockdown is lifted, ports will get swamped with cargoes.

Shipping capacity will then dry up and especially spot rates will surge again. Additionally, shippers will be confronted with tight intermodal capacities in the discharge ports, increasing costs for demurrage and detention may need to be absorbed within the cargo cost. 

It is thought that some 340 million people or 25% of the population live in the 46 cities under full or partial lockdown. Even though container terminals across these main ports remain open and operational the problematic part relates to closed manufacturing sites, warehouses and the ability to enter / cart freight from outside a “lockdown “region back through a “lockdown” area to the Port, as well as a reduction in available trucking capacity within the effected cities. 

Impact on the Ports & landside service performance once the lockdowns are lifted is expected to see shockwaves of volume across the operation both ways (Imports & Exports) 

Global supply chains are beginning to feel the crunch and it can be assumed that the full effects of the Chinese zero COVID policy will only become apparent in the coming weeks. 

In the last three weeks the picture of vessels sitting off Shanghai’s 2 main ports
and Ningbo have gone from this …
… to this.

Safety Issues at NZ ports

You will all be aware of the tragic deaths across two NZ Ports within the past month. Whilst the Ports of Auckland & Lyttleton continue to be fully operational following on from these incidents there will be ongoing change as revised policy around safer operating standards are introduced. 

NZ Port Performance 

Terminal & Yard congestion remains extremely high with POAL, Napier & Lyttleton operating at near
100 %-yard utilization and Tauranga at approx. 80-90%. 

A port or container yard operates at optimum performance around the 75-85% mark, anything more than that creates amongst other things, multiple handling of containers which reduces the overall efficiency of the operation, measured by container moves per hour. 

Influence of Shipping Hubs on today’s supply chain

For your reference, when delays / congestion at “Trans-ship” Hub points is raised the chart below gives an indication on the role they have played in the past 16 years in fashioning the services we have to work with today. When not utilizing one of the few “Direct “service from UK / Europe, or services ex China to NZ the vast majority of all freight will today move through one of these “Hub points”. 

BSMB Season 2021-22 

The Brown Marmorated Stink Bug (BSMB) “season” concluded on April 30th with a reported 60 incidents of live bugs detected in shipments over this period, dropping considerably on previous years. Improved reporting & monitoring in conjunction with greater awareness from Importers, ATF facility operators, Ports & Shipping lines have all contributed to the reduction in cases.

The good news is that there continues to be no evidence of an established BSMB population in NZ reported Biosecurity NZ after the close off to this year’s BSMB season. 

POAL – Changes to VBS = Off Peak enhancement 

The POAL have introducing a two tier VBS booking system effective Monday 2nd May, trying to encourage the pick-up / drop off of containers across the Ports container terminals by utilizing Off Peak time slots. 

Whilst Peak time VBS will rise slightly the Off Peak VBS will be notably cheaper. Credit given for the implementation of this scheme but for the majority of importers / exporters who require services during standard business hours this will offer little to no benefit against the other rising transport costs and surcharges in the greater Metropolitan area. 

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