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Logistics companies warn clients lockdown in Shenzhen will impact port activity

China’s COVID-19 measures will reduce work activity at world’s third-largest port

Port of Yantian. (Photo: Shutterstock)

This file was updated at 3:14 p.m. ET with corrected information from Seko Logistics.

With China locking down the port city of Shenzhen on Sunday in hopes of reducing a COVID-19 spread, Seko Logistics warned clients that the measure will impact the delivery of products from that region.

Other companies, including Worldwide Logistics Group and Orient Star Group, also issued advisories about a potential disruption.

Seko’s COVID-19 advisory note on Sunday explained that because of the weeklong lockdown in Shenzhen, “no cargo will be able to load in Yantian … and vessels most likely will omit the port.”

But on Monday afternoon, Seko issued a corrected advisory. “We have been advised that Yantian port terminals are operating and loading cargo,” the amendment stated.

Trucking restrictions for vehicles traveling in and out of Shenzhen remain in effect and could slow the supply chain, since no cargo from outside the restricted area can enter.

China’s “zero-COVID” strategy was previously used in Yantian in 2021, when it was closed for a month between May and June. The move created havoc on the supply chain, and the clog took months to dissolve.

The hit in trade from the closure of the third-largest port in the world can be seen in the SONAR chart below. The number of coveted boxes fell in July, when they were not able to be loaded in May and June.

As for shipping alternatives, getting product on a plane out of Yantian may not be feasible.

“We have not yet been advised of any official restrictions to Shenzhen Airport,” the Seko Logistics advisory noted, “however, the staff is unable to leave their homes to work at the airport.”

Other companies also are issuing advisories for their clients.

International logistics services provider Orient Star Group informed its customers that some container depots “are closed, (which) may affect empty pickup.”

Orient Star Group also listed the road restrictions that could inhibit the movement of any boxes, echoing the warning by Seko Logistics on future shipments, noting, “We believe some shipments planned in coming weeks will be affected.”

In a note to clients, WorldWide Logistics Group said, “We are experiencing the breakout of COVID in China mainland from last week. … The government is pushing everyone to have a nucleic acid test as soon as possible. According to [the] current situation, the COVID cases may keep increasing in the following weeks.”

While it is important to know about the lockdowns, it’s the duration of them which will hit the flow of trade the most. The fact WorldWide is stating the cases could increase, that means the lockdowns will continue.

Meanwhile, Nikkei reports that Foxonn, which has a manufacturing hub in Shenzhen and is the world’s biggest electronics contract manufacturer, is suspending production. 

Shenzhen, home to 17 million residents, is not the only city seeing COVID surges. Shanghai has instituted targeted lockdowns of schools, businesses, restaurants and malls.  

The issue is that trade and manufacturing take people. If workers cannot leave their houses, nothing can get made or transported. Shenzhen and Shanghai are the country’s major electronic manufacturing hubs.

Ports need trucks and warehouses open in order to move trade out of the port.  

Trucks outside of Shenzhen are unable to enter the city and cross-border shipments from Shenzhen to Hong Kong are not going anywhere unless they are considered “essential.”

There are other cities also facing “zero-COVID” measures. Changchun officials are only allowing one family member every day to go and get food.

Seko Logistics advisory

This is a portion of the advisory sent to clients on Sunday night.

Lori Ann LaRocco

Lori Ann LaRocco is senior editor of guests for CNBC business news. She coordinates high profile interviews and special multi-million dollar on-location productions for all shows on the network. Her specialty is in politics, working with titans of industry. LaRocco is the author of: “Trade War: Containers Don’t Lie, Navigating the Bluster” (Marine Money Inc., 2019) “Dynasties of the Sea: The Untold Stories of the Postwar Shipping Pioneers” (Marine Money Inc., 2018), “Opportunity Knocking” (Agate Publishing, 2014), “Dynasties of the Sea: The Ships and Entrepreneurs Who Ushered in the Era of Free Trade” (Marine Money, 2012), and “Thriving in the New Economy: Lessons from Today’s Top Business Minds” (Wiley, 2010).