China has closed the main terminal in Ningbo-Zhoushan, the world’s third busiest port, after it found that an employee was infected with Covid – likely putting further pressure on its long-running supply networks
This is the second time the country has suspended operations in one of its main ports this year.
Analysts say China’s “zero tolerance” approach to Covid will worsen supply chains already highlighted this year. Some warn that this won’t be the last closure on a port as long as Beijing holds its position.
Dawn Tiura, CEO of Sourcing Industry Group, a sourcing and sourcing industry association, said China’s position would have “heavy” supply chain consequences.
“China has zero tolerance for COVID. One positive test is enough to close the port,” he told CNBC in an email.
Ningbo-Zhoushan is the third busiest country in the world in terms of container volume. According to the World Maritime Council, it had 27.49 million twenty-foot equivalent container capacity in 2019. By 2020, container volume will increase by approximately 5% to 28.72 million TEU.
All inbound and outbound services at the Meishan terminal at Zhoushan Port were suspended until a warning Wednesday, according to Chinese state media. The terminal is the key to shipments to Europe and North America.
Supply chains have been severely disrupted this year as a result of crises such as the shortage of supply containers and the Suez Canal incident. In June, Covid infections caused disruptions at shipping hubs including Southern China’s main ports, Shenzhen and Guangzhou – China, suspending operations at ports due to Covid events.
Consequences of China’s ‘zero Covid’ position
Nick Marro, global trade director for the Economist Intelligence Unit, said China’s zero tolerance to Covid’s approach could not be the last for this latest port breach.
“China’s ‘zero Covid’ approach means that authorities will choose to reduce the pandemic above all else, especially given the Delta strain is highly contagious and the risks the current outbreak poses to future economic performance in the third quarter,” he said. A celebration on Wednesday.
As long as authorities maintain this ‘zero Covid’ position, the risk of testing or abrupt interruptions from the lockdown will remain, which are closely linked to factors such as normal vaccination times and national vaccination times.”
According to the widely spread delta variant in China, there is a revival in Jovid events. Daily events crossed the 140 mark on Monday – the highest daily number of infections since January, according to Reuters. Chinese authorities ordered mass tests in various regions and imposed extensive traffic restrictions in major cities, including Beijing.
The suspension of services at the Meishan terminal is due to the continued increase in container shipping rates this year. According to the Freightos Baltic global container shipping index, container shipments from China and East Asia to the west coast of North America increased more than 270% this year to over $15,800 per TEU. Interest rates on the east coast rose more than 220% to over $17,500 per TEU, according to the index.
China’s zero-Covid policy is so strict that it shut down a whole shipping terminal after just one case:
Analysts warn there will be more delays and consumers will have to pay as the holiday season approaches.
Tiura said the Covid outbreak in early June caused Shenzhen’s main Yantian terminal to cut exports by 70%. The waiting time for processing shipments has been increased from 3 days to 8 or 9 days.
If we experience something similar here and the transit time for ships increases 2-3 times, we will have a significant and long-term impact on exports, which will affect the holiday shopping season and increase inflation.”
“The container shortage has already strained global supply chains. Considering Ningbo-Zhoushan is the world’s third-largest container port, this closure exacerbates an already dire situation,” Tiura said. said.
He said container capacity will increase further and shippers will pass it on to consumers, which is likely to warm up global inflation ahead of the main holiday season.
Mario Ciabarra, CEO of data analytics firm Quantum Metric, said retailers will face many uncertainties during the holiday season, with inventory issues being one of them.
“There will be major concern as retailers face the decision to limit or not limit certain goods or manage higher costs associated with air freight goods,” he told CNBC.
EIU Marro also drew attention to the breaks that will increase the main demand before the holiday season.
“Trade gaps aren’t just a problem for shipping and consumers
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