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What can go wrong next in China? Now there’s a lockdown in Zhengzhou

After COVID cases were identified at the Zhengzhou railway station, the capital city of China’s Henan province is in lockdown for at least the next seven days. 

Yep, just what the supply chain needs when these exports feed out of Shanghai — which is already at a miserable pace.

Jasmine Wall, commercial manager for Asia-Pacific at Seko Logistics, tells American Shipper, “Currently, 80% of full trailer-load, point-to-point pickup-to-port requests can be fulfilled if picking up from the east of Shanghai. But the factory must do container loading by themselves.”

That’s the positive.

“If.”

The contingencies to get trade flowing within Shanghai are still challenging.

“For some heavily controlled areas, such as Kunshan/Changzhou, there is still no trucking solution, and no cargo can be picked up or delivered,” Wall said. “Although factories in these areas can apply for traffic permits, it remains quite difficult for them to be obtained at the moment.”

Hiring spree stopped

Kunshan, a manufacturing hub of industrial and auto parts, is home to Foxconn, which had to abruptly stop an announced hiring spree just 24 hours after it was rolled out in the region.

Recently, Li Auto announced, “The COVID-19 resurgence in this area has incapacitated some suppliers in Shanghai and Kunshan. Some of them completely shut down production or delivery of their products, making it impossible for us to maintain production after exhausting our parts inventory.”

The plumbing of manufacturing and logistics has become disjointed.

“The situation is very fluid and different local governments are changing regulations,” explains Keith Winters, CEO of Crane Worldwide Logistics. “In some areas of Shanghai, trucks and drivers are being blocked, while some are allowing trucks to enter under the precondition that the factories can get a truck permit from their local government authorities. 

“The holidays in China this week have further exacerbated the situation”

Concern in earnings calls 

It’s this supply chain sluggishness that has been the subject of concern in the majority of first-quarter earnings calls. 

Nick Raich, CEO of The Earnings Scout, tells American Shipper it is one of the reasons behind his overall bearish outlook for the second half of 2022 for earnings and stocks in general.

“A vast majority of companies cited inflation and supply chain disruptions for shrinking profit margins,” Raich says. “Until these two factors abate, the second half of 2022 earnings expectations are at risk of being drastically reduced, especially as the Federal Reserve raises interest rates in a decelerating growth environment.”

At the request of American Shipper, project44 broke out the weekly shipment delays from Shanghai to the West Coast.

The clock starts on these shipments when the container is placed on the vessel. Port productivity at the Port of Shanghai and the destination ports are the reasons behind these results. Long Beach has seen the largest decrease in delays in recent weeks.

On the East Coast, even with the increase in vessel anchorages, containers from Shanghai are coming into port in a timely manner. It’s just one of the reasons why the East Coast has become a choice for logistics managers.

As logistics managers look for route solutions to make up for time, it does not change the vulnerability to “zero-COVID.” 

More from Lori Ann LaRocco

Viewpoint: China COVID policies to squeeze flow of European exports to North America

The real victim of Shanghai’s COVID lockdown? Intra-Asia trade pipeline