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Shanghai’s weekend quarantine measure impacts exports

Yangshan, Shanghai China (Photo: (Shutterstock/Weiming Xie)

Shanghai’s weekend quarantine of 15 out of its 16 districts affected the flow of exports bound for the Port of Shanghai, according to CNBC Supply Chain Heat Map provider OrientStar Group.

“Highways were closed because of this latest round of quarantine,” the logistics company told CNBC. “Trucks loaded with cargoes and containers were unable to enter the Shanghai terminal. Many clients have no choice but to change the loading ports to Ningbo or other outports along the Yangtze River.”

During the two-month lockdown that started in April, the port of Ningbo became the alternative port for logistics and, as a result, congestion at that port has been increasing.

CNBC supply chain heat map showing China supply chain
Source: CNBC Supply Chain Heat Map

OrientStar Group reported there are still positive COVID-19 cases found in certain districts in Shanghai and regulations are still being imposed in those areas to limit the spread.

“Production and manufacturing are basically resumed in Shanghai, but once there are quarantines, transportation and drayage are affected to a certain extent,” the group added.

Raw material shortages during the lockdown affected production for companies Volkswagen and Tesla.

Before the latest restrictions, truck drivers were still required to provide a nationally recognized 48-hour negative COVID test result and traffic permit, said Ahkil Nair, Seko Logistics’ vice president of global carrier management and ocean strategy for Asia Pacific. In practice, he said, many local governments have also demanded that tests be retaken locally and on highways.

“Some drivers are cautious about delivering into Shanghai and capacity has yet to fully recover to pre-lockdown volumes,” he said.

The latest quarantine restrictions came at a time when trucking recovered to around 80%.

U.S. trade tea leaves

OrientStar Group is also seeing a pick-up in West Coast cargo, which has been trending down. This is a forward-looking indicator of the container uptick that many logistics experts were predicting. Containers bound for the East Coast remain strong and stable.

SONAR: TEU rejections from all ports in China to the United States
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Planning ahead

Akil Nair, Seko Logistics’ vice president of global carrier management and ocean strategy, said once Shanghai does open up, drayage rates will spike $500-$1,000 across China and the rush of cargo will overwhelm the Ports of Los Angeles and Long Beach.

“There are a few reasons why this will happen,” he explained. “The first, carriers are already reducing inland port bookings. This will increase dwell times on dock in [Los Angeles and Long Beach], thereby further congesting, consuming chassis, etc. Railroads also continue to struggle to feed sufficient stack cars to the ports of Los Angeles and Long Beach to cover the inbound volumes. Once Los Angeles and Long Beach are backed up, that will then spread to the ports of Oakland and Seattle/Tacoma.”

CNBC supply chain heat map showing the US supply chain
Source: CNBC Supply Chain Heat Map

To regain some semblance of control over the situation, logistics managers continue to move more containers to the East Coast and Gulf Coast.

Graph of import vessel teu capacity

Unfortunately, the volume of containers is creating congestion. To keep up with growing container volume, the Port of Houston recently announced gate hours on Saturdays for the rest of the year. The Port of Savannah is using its pop-up container storage lots to free up land capacity.

“2022 is showing us that East Coast ports are just as susceptible to congestion,” said Josh Brazil, vice president of supply chain insights at Project44.

Europe labor strife continues

The German ports are feeling the heat as a result of labor strife.

Negotiations between the union ver.di, which represents about 70% of the port workforce, and the Central Association of German Seaport Companies continue. Union workers had a “warning strike” during the Thursday evening shift at the ports of Emden, Bremen, Bremerhaven and Wilhelmshaven.

The Port of Hamburg is already congested with containers. So much so, the railroad cannot move in any export containers.

Andreas Braun, EMEA ocean product director for Crane Worldwide Logistics, says any loss of manpower will only add to the congestion.

“Feeder operators see up to five-day delays waiting for berth to pick up their containers, and round trips between Rotterdam-Dublin-Rotterdam have increased from six to nine days. More vessels need to be injected by the feeder operators to keep the schedule somehow reliable,” Braun said.

CNBC supply chain heat map showing europe's supply chain
Source: CNBC Supply Chain Heat Map

The Port of Hamburg, Europe’s third-largest container port and the largest railway port, is a key port for autos. For the United States, key exports of auto parts, tractor supplies, laminate flooring and lithium batteries for automakers like Ford come through the East Coast ports. Companies such as BMW, Rolls-Royce, Volkswagen, Michelin, Ford, Ikea, BASF, Siemens and Bayer export their products out of the Port of Hamburg.

The CNBC Supply Chain Heat Map data providers are artificial intelligence and predictive analytics company, Everstream Analytics; global freight booking platform Freightos, creator of the Freightos Baltic Dry Index; logistics provider OL USA; supply-chain intelligence platform FreightWaves; supply chain platform Blume Global; third-party logistics provider OrientStar Group; marine analytics firm MarineTraffic; maritime visibility data company Project44; maritime transport data company MDS Transmodal UK; ocean and air freight benchmarking an analytics firm Xeneta; leading provider of research and analysis firm Sea-Intelligence ApS; Crane Worldwide Logistics; and air and freight logistics provider SEKO Logistics.

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).