A resurgence of the Covid-19 virus in China risks causing more bottlenecks in the world’s supply chain, says shipping giant Maersk.
The article, available here, says that the cities of Beijing, Hong Kong, Shenzhen, Shanghai, and Qingdao are currently dealing with Covid-19 flareups. This, said Maersk, is leading some experts to worry about the impact on supply chains, which are already stretched after two-years-and-counting of the pandemic.
It added that the majority of schools in Shanghai have already been shuttered, as well as public parks. Despite the desire by local government to maintain a normal working environment, the effects are already being felt across the nation and in Hong Kong.
Maersk wrote: “Supply chains are already pressed in Hong Kong, with lowered truck driver capacity due to positive Covid tests. Forwarders estimate a cut of at least 70% trucking capacity, which in turn is having a domino effect on the rest of the supply chain. Experts note that the local trucking capacity to and from the rest of China has been severely impacted. There is a worry that longer delivery times and a possible rise in transport costs could await.”
It added: “Air freight is also affected in Hong Kong. Due to the lengthy cross-border process, cargo is delayed in reaching the next component of their supply chain, air freight.”
It went on: “In relation to this, some air freighters have decided to delay the resumption of their operations until IATA summer schedule, such as Virgin Atlantic. Cathay Pacific Airways LTD, has cancelled hundreds of flights, due to the government’s choice to scrap aircrew quarantine exemptions, resulting in lowered labour capacity and lowered cargo movement.”
Maersk said it was closely monitoring the situation and said it would continue to keep its customers informed.
Months in the making
This is not the first concerns over the global supply chain that we have run with on these pages.
Back in October, Expert Investor reported that multiple market watches—according to the Financial Times, Deutsche Welles, and CNN Business—were reporting that supply chain disruption was likely to spread over 2021 and into 2022.
Our piece in October quoted Evan Quasney, VP of global supply chain solutions at Anaplan, who was speaking to Deutsche Welle.
He said: “These delays and concerns have been months in the making. There are a lot of factors that have been driving this but it boils down to a few topics: big swings in capacity and availability around the world. What we’ve seen is that a small shutdown, often in a goods-producing economy, can delay production and outbound shipping during the late summer production crunch, right as consuming economies were placing their large holiday orders. And this created a ripple effect.”
He added: “Look through the entire network – for example, dwell time at one port earlier this year went from a half day to 16 days – basically overnight – due to a Covid lockdown. Now, imagine that happening at many ports almost at random around the world […] it’s created a really challenging operating situation for many companies everywhere.”
And if that was not enough, the war in Ukraine following Russian invasion, is likely to spill over into the world’s wheat supply.
As the New York Times reported last month: “Russia and Ukraine together export more than a quarter of the world’s wheat, feeding billions of people in the form of bread, pasta and packaged foods. The countries are also key suppliers of barley, sunflower seed oil and corn, among other products. […] Disruptions and rising prices for those commodities — as well as the cost of fuel and fertilizer, important inputs for farmers — could further buffet global food markets and threaten social stability, analysts said.”