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COVID resurgence in China impacting supply chains, warns Maersk

31st March 2022 - Author: Matt Sheehan

Shipping and logistics company Maersk has warned that flare-ups of COVID-19 across many of China’s largest cities are having an adverse effect on global supply chains.

A number of cities in China, including Beijing, Hong Kong, Shenzhen, Shanghai, and Qingdao, are currently dealing with a resurgence in COVID cases.

In response, the country has enacted strict border controls, extensive testing, and lockdowns, whilst also using measures to ensure stable operations for businesses.

In particular, Shanghai – which is China’s largest port – has been forced to shut schools and parks, although the city has ruled out imposing a broad lockdown for now.

Whilst COVID figures still remain low compared to many other countries, Maersk notes that China is increasing its efforts to mitigate the current situation following more than 7,000 registered cases in the first two weeks of March.

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In Hong Kong, supply chains are already pressed, 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.

Air freight is also affected in Hong Kong due to the lengthy cross-border process, meaning cargo is delayed in reaching the next component of their supply chain, air freight.

Maersk also foresees an increase in vessel waiting times in the Yantian and Chiwan ports in Shenzhen, while factories have closed across  Dongguan, a key manufacturing hub in the southern province of Guangdong.

Additionally, manufacturing plants have been affected in Changchun, an important industrial base with a particular focus on the automotive sector.

“Supply chains are finely tuned, sensitive ecosystems, where one ripple can be felt throughout the chain. Whilst manufacturing also takes place in other parts of the country, these delays will still affect output, though not drastically,” Maersk said.

“Maersk is closely monitoring the situation in China, and business contingency plans have been activated. We have been notified that all ports and terminals in Shenzhen (Yantian and Chiwan) are currently working as normal, including vessel operations, yard handling and gate-in-and-out.

“However, we foresee vessel waiting time will increase in these ports,” it added. “We understand the repercussions a situation like this may have on your supply chain.”

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