The current Shanghai Covid lockdown has created severe delays at the port, delivering a $28 billion hit to global trade, with clothing and textiles industries having the most exposure, according to analysis by Russell Group, a data and analytics company.
Recent COVID flare-ups across China have caused huge disruption both to local businesses and to global supply chains.
Shanghai – the country’s largest port and a major financial hub – has been dealing with COVID-induced lockdown rules for many weeks now, and the capital city, Beijing, is coming under increasing pressure to impose widespread lockdown measures itself.
And now, analysts at Russell Group are putting a figure of $28 billion on the trade hit from Shanghai alone.
Scenario analysis conducted by ALPS Marine has identified that clothing ($884 million), textiles ($717 million) along with cars and people carriers ($767 million) would be typical exported commodities from Shanghai.
Imports, including an estimated $298 million of meat products normally moved through Shanghai, have also been disrupted.
This analysis was based on the 2-month time frame from early March, when the lockdown was first imposed, to early May, when the cases are starting to reduce but delays at the port are rising due to a large backlog.
Russell analysts also noted that Shanghai’s delays are impacting other countries that rely on trade with the port city, with 14.7% of Shanghai’s exports in this period going to the United States, to Long Beach and Los Angeles, both of which are suffering from COVID backlogs.
“There is an old saying that what is global is local and what is local is global. In today’s era of trade disruption, we are facing another major port slowdown in China,” said Suki Basi, Russell Group, MD.
“This is a similar situation to the disruption at the start of the year, so the tension between local and global events is more evident and their causation is becoming increasingly connected across multiple asset classes.”
Basi continued: “The delays in China have caused chaos across the global economy, hitting consumers and corporates alike. They will damage Western economies, particularly in the UK and USA, both of which are suffering high inflationary pressures. Any further supply chain shocks such as port delays will continue to push up prices and slow down the economic recovery of these economies.
“What we are hearing from our clients and corporate risk partners in this era of disruption is that having timely real-time data can help (re)insurers, corporations and policymakers understand and manage their risks.”