As 2023 dawns, China has lifted many of its COVID-19 regulations which have led to a surge in cases. The burgeoning cases are impacting manufacturing orders. Logistics managers are warning their clients that factories might not be able to complete orders. As it stands, order fulfillment has already started to plunge by 40%. Ocean bookings are also starting to occur.
HLS, a Hong Kong shipping firm wrote, “With 1/2 or even 3/4 [of the] labor force being infected and not able to work, many China manufacturers cannot operate properly but produce less than their optimal outputs. The container pickup, loading, and drayage (trucking) are also affected as all businesses are facing the impacts of COVID. We expect a very soft volume after the Lunar New Year because a lot of factories have slowed production due to the increasing infection and have to cancel or delay the bookings for the 2nd half of January and also early February.”
They went on to state, “All indications that the Chinese cities are experiencing infection peaks is based on the surge of infected family members, friends, and colleagues, the long lines at the fever clinics at hospitals across the country.”
Three of China’s main ports have started to experience significant delays as a direct result of Covid.
The world’s number one container port, Port of Shanghai states, “Cancellations are increasing as many factories can’t operate properly due to a lot of workers getting infected with Covid.” The Port of Shenzhen also issued a warning to the world. They are the home of Apple and have stated, “The booking cancellation is increasing as many factories can’t operate properly due to a lot of workers getting invested with Covid.”
The sixth-largest port in the world, Qingdao reported that factories were experiencing a cut in labor by ¼ and cannot make normal production quotas.
Alan Baer, CEO of OL USA states, “Factory orders are down between 30%-40%, which you would think would help in the completion of the products. This is not happening in some areas of the country which is troubling. Then you must factor in the additional Covid surges after Chinese New Year. Q1 will be challenging.”
Alex Charvalias with Supply Chain In-Transit Visibility Lead at Marine Traffic stated the following in an interview with CNBC. “While China has recently removed its zero-Covid restrictions, the congestion in Shanghai seems to have risen as Marine Traffic data shows that during the first week of 2023 that the average vessel TEU (twenty-foot equivalent unit) capacity waiting out of port limits was 321,989 TEUs, which is the highest amount recorded since April 2022,”. Even Ningbo and Quindago are experiencing an increase in congestion with reports at 273,471 TEUs and 277,467 TEUs. “Transpacific to East Coast port volume will remain under pressure until companies reach a balance between existing inventory levels and their expected sales rate.”
