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Lockdowns, not Ukraine pose biggest threat to China supply chain, says expert

[ March 14, 2022   //   ]

Covid lockdowns could cause greater damage to China’s supply chain than the Russia-Ukraine crisis, says the  Container xChange logistics platform in its latest analysis.

It says that, two weeks since Russia’s invasion of Ukraine, there seems to be a negligible impact on container prices and leasing rates in China while container availability had improved soon after the Chinese New Year across key ports. However, with the announcement of nationwide lockdowns, the supply chain must prepare for yet more turmoil in the coming months as importers worldwide prepare for the coming peak season later this year. 

The lockdowns in Shenzhen, Zhejiang, Shanghai, Jilin, Suzhou, Guangzhou and Beijing  with probably more to come, will heavily restrict container movement, says Container xChange.

The war will just prove to be another disruption amongst the other innumerable factors for China’s supply chain, predicts Container xChange co-founder and chief executive Dr Johannes Schlingmeier.

He said: “Freight rates and container prices were already at a record high even before the invasion started and what happened immediately due to the war is that the Russian ports were not being called by the national shipping lines anymore, the Black Sea being closed, and the Asia European railway being quite hit by this. The immediate impact of this on the overall supply chain has not started to show up.

However, Russia’s importance to global container trade is not big enough to really disrupt supply chains. Container prices at record highs, containers piling up and a massive shortage are the result of many other disruptions over the past two years since the pandemic started, he said.

“Lockdowns in China will further reduce capacity and cause a surge in already inflated shipping prices. The shockwaves will be felt across the US and America, and almost everywhere in the world,” he added.

He predicted that, iIn the immediate future, closure of the Asia- European railway (which only accounts for roughly 2.5% of Asia-Europe cargo) will causehigh-value cargo to be pushed to ocean freight which is already low in capacity, putting more pressure on the already struggling supply chain. “Adding on top of this, China’s lockdowns will be nothing less than a major shockwave to an already crippled supply chain,” argued Dr Schlingmeier.

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