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China’s Covid-19 outbreak threatens backlog at busy Shenzhen port


Cargo ships are piling up at one of China’s busiest ports after another Covid-19 outbreak shuttered factories and warehouses in Shenzhen, hinting at a new set of bottlenecks that could drive up freight rates and slow deliveries.

More than 35 ships are waiting to dock in Shenzhen and another 30 further north in Qingdao, according to ship brokers. The Port of Shenzhen, which serves a major manufacturing and export hub, includes the Yantian Terminal, which handles about a quarter of all Chinese exports to the United States. Shenzhen remains open, but most manufacturing plants and warehouses were ordered to close last week, and container loading is rapidly decreasing as fewer trucks arrive.

“I have a load of bicycles, but I blocked 16 kilometers on the highway entering the port for almost two days,” said Wei Wu, a truck driver transporting boxes for a European container operator and of logistics. “Very few moves in Shenzhen. You have to test repeatedly, and I don’t know if the ship will be allowed in.

Qingdao, pictured in February, is one of the Chinese ports where ships wait to dock.


Photo:

Costfoto/Zuma Press

The lockdown in Shenzhen was partially lifted on Friday after President Xi Jinping told a Politburo meeting that while sticking to its zero Covid-19 policy, the government should “minimize the impact” of the pandemic on the country’s economy.

The Shenzhen government said on Friday the city of more than 12 million people had resumed some factory work as well as public transportation services.

A Covid-19 outbreak shut down Yantian Terminal for nearly a month in June, creating a backlog of tens of thousands of containers while dozens of ships waited weeks outside Shenzhen to load. Operators diverted a number of ships to other ports, which eventually recrossed the Pacific and created bottlenecks at the California ports of Los Angeles and Long Beach.

The Yantian epidemic has reduced operations at this terminal by about 75 percent, according to ship brokers. Daily freight rates across the Pacific rose by a quarter during the lockdown as freight owners tried to find ships that would call at other Chinese ports and transport their products.

Freight forwarder Seko Worldwide said in a report last week that there are restrictions for trucks traveling to and from Shenzhen and that trucks from Shenzhen to Hong Kong have stopped operating except for essential goods. bound for Hong Kong.

He said restrictions on trucks also remained in Shanghai, the world’s largest port, with some ships being redirected to Ningbo.

Hong Kong has faced a record rise in Covid-19 cases and the highest death rate in the world, prompting authorities to impose tough restrictions. The WSJ’s Diana Chan recounts how daily life has changed in the city, from panic buying to residents exodus. Photo: Emmanuel Serna/Zuma Press

Danish boxship company AP Moller-Maersk AS said that although the Shenzhen terminals are operational, the company has drawn up contingency plans and may divert ships if Covid-19 restrictions remain there.

Kuehne & Nagel International AG

, a logistics operator based in Switzerland, said that in some cases it changed drivers for trucks entering Shenzhen to circumvent delays due to restrictions on intercity transport. He said ships wait an average of about 3.5 days for berths in Yantian.

Freight rates from China to Los Angeles last week were flat from the previous week at around $16,242 per container, according to the Freightos Baltic Index, but remained near record highs and tripled from at the same time a year ago.

Backup outside the ports of Los Angeles and Long Beach, the country’s two largest gateways, was 48 ships Thursday, down from a record 109 in early January, according to the Marine Exchange of Southern California. Port of Los Angeles executive director Gene Seroka said he expects a new wave of ships in the coming weeks.

Analysts said if ports in China remained open, the pause in manufacturing would eliminate some of the backlog of boxes waiting to be loaded. But with the warehouses closed, finding space for incoming containers will be difficult.

“All things considered, the impact – for now – is clearly not as great as last year,” said Lars Jensen, managing director of Vespucci Maritime, a Denmark-based consultancy. “Hopefully it doesn’t get worse, but China’s Covid zero tolerance and the Omicron variant are not a happy mix.”

The latest outbreaks have led major manufacturers, including Foxconn Technology Group, an Apple supplier Inc.,

Toyota engine Corp.

and Tesla Inc.

to reduce production.

Measures taken by China to contain outbreaks will determine the impact on the global supply chain. About half of China’s exports are produced in areas facing Covid-19 outbreaks, and three-quarters of its exports are shipped there.

On Wednesday, Taiwan-based Foxconn said it was able to restart some operations at Shenzhen campuses where workers live in dormitories alongside assembly lines. Tesla, which makes Model 3 sedans and Model Y sport utility vehicles in Shanghai, told employees and suppliers it would halt production on Wednesday and Thursday last week.

United Parcel Service Inc.

issued service alerts. Pickup and delivery have been suspended in Shenzhen and Dongguan, while in Zhejiang province and elsewhere imported items would be set aside for four to seven days to be disinfected, the company’s website said.

Write to Costas Paris at [email protected]

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