Summer shopping warning: Retailers face supply chaos as China lockdowns disrupt shipping

China: Shanghai’s lockdown is causing food shortage concerns

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The city of 26 million people has been placed under strict restrictions after initial attempts at a partial staggered lockdown failed. While most major economies have adopted a strategy of living with Covid, China has doggedly stuck to its zero Covid strategy, even closing down vital economic hubs such as Shanghai and Shenzhen. Nearly 500 cargo ships are reportedly now waiting off the Chinese coast as alternative ports become increasingly congested due to shipping firms trying to avoid Shanghai. While ports in Shanghai have been kept open warehouse closures, trucker shortages and a lack of exports to pick up have deterred vessel operators from wanting to land. Danish shipping giant Maersk is now advising customers to divert cargo to other ports to avoid Shanghai.

A spokesperson for Maersk told they had seen “an increased density in dangerous goods and reefer container yards.”

Reefer, or refrigerated containers, typically contain perishable goods such as fresh food and drinks as well as flowers and pharmaceuticals.

The spokesperson added that ships had been making use of alternative ports although some of these were also now seeing increased waiting times.

A spokesperson for the International Chamber of Shipping said: ” China is the source of many of the world’s trade routes so clearly any domestic disruption will have a knock on effect globally.

“As we’ve seen throughout the pandemic, supply chain disruption has a lag time associated with it so the effects will continue to be felt in the coming weeks and months.

“The conflict in Ukraine is also affecting global trade and this, combined with delays at Chinese ports, has created the perfect storm for the global supply chain.”

This latest round of disruption comes as supply chains have been seeing a gradual recovery from previous difficulties during the pandemic, with knock on effects for businesses and consumers in the UK.

Speaking to James Hookham, Director of the Global Shippers Forum, warned stock for summer, which should be on the sea, could now be delayed.

While most spring stock is already on shelves, retailers will have lined up orders of consumer goods for the summer meaning potential disruption to come.

He added: “Plenty of importers will be beginning to sweat.”

While some impacts may not be immediately obvious to consumers the effects on businesses reliant on China for key materials and components is likely to eventually ripple down the supply chain in the coming months.

In particular Mr Hookham suggested the ongoing shortage of microchips could get worse with impacts in turn on the production of cars and electronics.

Car manufacturing has slumped since the pandemic due to shortages of the chips which are widely used throughout vehicles with some carmakers forced to pause production.

Mr Hookham pointed to the previous effects of lockdowns in 2020 which he said resulted in “mass cancellations” of shipping.

With China now shutting down factories, ships will be unlikely to sail if there is no economical load waiting for them in the port.

However the exit from lockdown could be equally disruptive given China’s previous ability to rapidly swing back into production.

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In such an event Mr Hookham predicted there could be a “surge of new sailings” to deal with the backlog leading to ports being overwhelmed.

Shanghai is a particularly vulnerable point in global supply chains due to the dominant role it plays.

According analysis by Spanish financial services firm BBVA Shanghai transferred around 20 percent of China’s total exports to the rest of the world in 2021, warning the impact of it not functioning would be “substantial.”

The report noted: “If Shanghai port stops functioning, it’s difficult for other nearby ports to fill in the void given its gigantic capacity.

“By then the global supply chain will directly feel the pain of Shanghai’s lockdown.”

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