China’s Recent COVID Outbreak and the Supply Chain Impact

China’s Recent COVID Outbreak and the Supply Chain Impact

Cause: COVID-19
Shanghai’s recent COVID outbreak coupled with China’s official zero-COVID policy mandating partial or full lockdowns of over 24 cities has created a supply chain nightmare. This has impacted the flow of goods both inbound and outbound. The lockdown of supply chains and the marine vessel build-up have created increased congestion off the east coast of Shanghai and around the port area.

This week has been more relaxed with operations slowly reopening their manufacturing and supply chain movement. Also, the factories that operated with skeleton crews are now announcing their floor and warehouse space are full of completed orders. Truckers that are limited and under restrictions are unable to move their goods. Container vessels still waiting are numbered in the hundreds and are backed up at terminals and/or anchored off China’s coast. Three major carriers changed their voyage calls to avoid calling at Shanghai which is anticipated to throw off schedules.

China’s vessel backlog could harm U.S. domestic production and distribution and while inventories are at record highs, backlogs at U.S. ports may increase.  The West Coast Executive Port Directors of Los Angeles and Long Beach have both been advising the supply chain and current backlog of vessels and on-dock long dwelling containers are down. The number of vessels en route to the twin ports is hovering around 24 container vessels en route, which earlier this year was estimated at over 100 exceeding 150 nautical miles (NM), either steaming or loitering toward the twin ports.

Effect: Tsunami of Cargo Anticipated to hit LA/LB
Eric Kolisch from American Shipper reported in part, “The breather from West Coast port congestion will be flooded from the deferred cargo once COVID-related lockdowns in China are lifted.”

Kolisch further projects, “The cargo volume will far exceed the handling capability of the ports of LA and LB with containers jamming up terminals faster than they can be transferred to inland transport and pushing vessels into long queues at sea.”

Mario Cordero, Executive Port Director stated in part, “Imports continue to be on the rise as they continue to clear the line of ships waiting to enter the port of Long Beach and are moving containers off the docks. Collaborating with our industry stakeholders has led to notable improvements across the supply chain.” Both LA (Los Angeles) and LB (Long Beach) ports have seen a 49% decline in aging cargo on the docks since a fee assessment was threatened in October 2021 and they continue to defer the actual collection week by week.

Pete Buttigieg, Department of Transportation Secretary, on April 12, 2022, urges railroads to clear the LA-LB container backlog. On April 12, 2022, the JOC (Journal of Commerce) reported that Buttigieg told CEOs of western U.S. railroads they need to address the problem of rising rail container dwell times in LA-LB that is contributing to terminal congestion at the largest gateway to the U.S.

Please contact your Western Overseas representative with any questions.