Latest COVID spike sees Shanghai enter a two-phase lockdown

Monday 28th March sees Shanghai, China's largest city, become the latest victim in a wave of COVID shutdowns across the country. Tesla's Gigafactory is suspending production for at least four days, as a city of 26 million people reports over 3,500 new cases per day.

The Shanghai government announced a two-stage lockdown of the city to limit the spread, with all factories and public transport expected to shut down across the city as the Omicron variant hits levels not seen since the early Wuhan days of the pandemic.

Authorities had sought to ease disruption with a targeted approach to the outbreak marked by rolling 48-hour lockdowns of individual neighbourhoods combined with large-scale testing, but this softer strategy has failed to dampen city case counts.

A Local Medical Task Force Member stated: "If Shanghai comes to a complete halt, there will be many international cargo ships waiting in the East China Sea...This would impact the entire national and global economy."

Authorities have implemented a restricted green channel for Fully Loaded Containers entering ports and Pudong Airport, for drivers able to provide a 48 hour negative COVID test, but as the infection spreads, this is likely to have a minimal impact on goods leaving China.

The long term impact of this latest lockdown is yet to yield sufficient data, but as you have come to expect from KC Group Shipping, we will be working closely with our shipping liner agencies and supply chain partners to minimise the disruption for our clients.

Alternative Routing

With major trucking bottlenecks and restrictions around Shanghai Ports - Yangshan and Waigaoqiao container ports, surrounding warehouses, and Pudong Airport. KC Group Shipping recommends routing cargo through Ningbo Port, 97 km from Shanghai.

While alternative routes in and out of other Chinese ports and airports are currently being implemented, more shutdowns are likely as this Omicron variant seems impossible to keep under control.

Commodity price swings warning

The Bank of England is warning of extreme commodity price swings over the next few months, with the Shanghai lockdown seeing the oil price drop 7% on Monday as the markets react to the expected reduction in demand from China. But this is also likely to push up the price of raw materials, including steel, as production slowdowns reduce supply chains.

We also expect to see a rise in airfreight costs. Over recent years, many air cargo operators have reduced capacity, with demand for limited capacity likely to drive up pricing.

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