COVID in China is worsening supply woes
BEIJING — China’s mounting COVID-19 restrictions are creating further disruptions to global supply chains for consumer electronics, car parts and other goods.
A growing number of Chinese cities are requiring truck drivers to take daily COVID PCR tests before allowing them to cross municipal borders or are quarantining drivers deemed to be at risk of infection. The measures have limited how quickly drivers can move components among factories and goods from plants to ports.
Shanghai and other major Chinese cities have imposed lengthy, stringent lockdowns to try to control COVID outbreaks. Previous interruptions in the supply of goods from Chinese factories to buyers around the world mainly involved the temporary closure of shipping ports, including in Shenzhen in southeastern China in May and June last year and then near Shanghai last summer.
“The problem is not ships; it’s that there’s no cargo coming because there are no trucks,” said Jarrod Ward, the chief East Asia business development officer in the Shanghai office of Yusen Logistics, a large Japanese supply chain management company.
The testing of truck drivers has been held up because some cities are doing mass testing of residents. Shanghai tested essentially all 25 million people within its borders in a single day Monday and detected an additional 21,000 cases Thursday.
Now there is an acute shortage of truck drivers in Shanghai and in nearby cities such as Kunshan, a center of electronics production. Many electronics components manufacturers are shutting down in Kunshan.
“The key electronics suppliers to Apple, to Tesla, they’re all based there,” said Julie Gerdeman, CEO of Everstream, a supply chain risk management affiliate of DHL that is based in San Marcos, Calif.
Apple declined to comment, and Tesla had no immediate reply to questions.
Many factories have tried to stay open by having workers stay on site instead of going home. Employees have been sleeping on mats on the floor for as long as four weeks in some cities in northeastern China. Companies have been storing goods in nearby warehouses while waiting for normal truck traffic to resume.
But as lockdowns stretch on in cities such as Shanghai, Changchun and Shenyang, factories are starting to run out of materials to assemble. Some are sending their workers home until further notice.
Making car seats, for example, requires springs, bolts and other materials. Ward said car seat producers have run out of components. Volkswagen said the company closed a factory outside Shanghai.
While Shanghai’s cases increase, its main rival in electronics manufacturing, Shenzhen, has emerged from lockdown. That is freeing workers and factories there to resume full-speed production.
Retailers and manufacturers in the West have tried to adapt to previous supply chain difficulties in China by switching from ships to airfreight, but rates for the latter have more than doubled from last year.
The near-total suspension of passenger flights in and out of Shanghai has roughly halved the airfreight capacity there, said Zvi Schreiber, CEO of Freightos, a freight booking platform. The war in Ukraine has forced many airlines to schedule longer flights around Russia and Ukraine, which means each plane can make fewer trips in a week and often can carry less weight on each flight.
The war in Ukraine is also starting to hurt the availability of Soviet-era Antonov freighters, Schreiber said. These workhorses of the airfreight industry have been kept going in recent years almost entirely by Ukrainian maintenance bases that are now closed.
For companies, any additional disruptions to the global supply chain would come at a particularly fraught moment, on top of rising prices for raw materials and shipping, along with extended delivery times and worker shortages.