Pressure on supply chain tightens
EXPORTS: Lockdowns and port delays in China will make supply-chain logistics worse, writes
The supply-chain headache for NZ Inc is about to get extra painful, with hard Covid lockdowns in China likely to prompt shipping lines to cut out ports there and possible cancellation of some air freight services to this country.
The warning is from Customs Brokers and Freight Forwarders’ Federation president Chris Edwards, who said the impact of lockdowns, particularly in Shanghai, is already starting to bite here.
Shanghai port — the world’s largest — is open, as is Shanghai’s main airport, but the problem is the effect of the lockdowns on factories, truck drivers and order lead times, he says.
“The numbers are staggering in terms of scale — testing all residents in Shanghai is like testing every citizen in Australia: a mammoth undertaking.
“Some economists estimate Shanghai’s lockdown will cost the Chinese economy US$35 billion per month ($51b) or roughly 3 per cent of its GDP. If you are a client dealing with suppliers in the Shanghai region, you are going to see your lead times greatly extended across all types of commodities — especially in the tech and electronic industries, which are clustered around the Shanghai area.
“As factories produce less orders, this sees cargo volumes dropping and that inevitably will lead to ‘blanked’ ports in China and possible cancellation of some air services to New Zealand.
“We are already seeing this from China to other markets.”
Another upshot would be congestion in Shanghai for import vessels, which would have an impact throughout the supply chain as seen in Shenzhen last year, Edwards said.
“The supply chain does not cope well with congestion.
“That same congestion will also affect our exports as shipping lines will choose to bypass some ports in China.”
Edwards said marine tracking websites were showing around 500 vessels already at anchor off the Shanghai port.
On a scale of 10, the severity of New Zealand’s supply chain delays and issues could worsen by between 6 and 8 — depending on how long the lockdowns in China continue, he said.
Shanghai suppliers had already told New Zealand customers they were running late or didn’t have the staff to process orders.
“Or they’re saying we have alternative ports for these goods to leave from — what options do you have if the stock happens to be on hand?”
His company’s office in Shanghai was reporting no truck drivers were available and factories were without staff.
It had found solutions for some New Zealand customers “desperate” for goods by trucking products “huge distances” to ports.
“It blows costs out of the water, it can be by many thousands of US dollars extra, but some customers are so desperate they’re willing to pay that.
“Next we will see shipping lines making their calls on this. They’ve already stopped accepting bookings to Shanghai for difficult products like frozen foods and hazmat [hazardous materials]. It won’t be long before general cargo is affected as well, and there are problems at the port.”
Edwards said China had a lot of ports that could be used instead of Shanghai but the issue was finding a trucking company to take goods there — “that’s getting more and more difficult”.
Chinese suppliers had indicated they were trying to make products at different sites to avoid the lockdown problems.
In China, certain industries tended to be clustered in particular areas, Edwards said. For example Nanjing was notable for chemicals and plasterboard production, while Shanghai was a technology product centre.
“Unless the Chinese government changes its policy this could roll on for many months. It’s out of shipping lines’ control.”
The supply chain does not cope well with congestion. That same congestion will also affect our
exports as shipping lines will choose to bypass some ports in
China. — Chris Edwards, Customs Brokers and Freight Forwarders’ Federation