Forex Analysis & Reviews: 13.01.2022 - Supplies struggle due to...

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13.01.2022 04:16 PM

Supplies struggle due to COVID-19 outbreaks

In an effort to avoid supply disruptions in China, cargo ships are heading to Shanghai, thereby creating bottlenecks at the world's largest port.

Supplies disruptions continue to exist because of COVID-19 outbreaks

According to shipping agents and experts, shipping companies are diverting ships to avoid being stranded in Ningbo, which has suspended some cargo traffic and shipments since the Covid-19 outbreak. In addition to Shanghai, ships are also being diverted to Xiamen in southern China.

The new interchanges exacerbate the wave of traffic jams at China's ports, as more and more cities here face outbreaks of the pandemic. Strict testing of workers and truckers ahead of the upcoming Lunar New Year further exacerbates already strained supply chains as the pandemic continues.

Coronavirus testing does not help

Among other things, the mass coronavirus testing of residents and truckers at the country's technology center in Shenzhen in the south to contain the outbreak is contributing to congestion at ports.

The Shekou terminal began restricting the acceptance of goods, probably due to a lack of storage space and an unwillingness to be held responsible for damage to goods caused by missed delivery deadlines.

This means that since Friday, full containers can only be delivered three days before ships arrive, the terminal operator said Tuesday, January 11.

The city of Tianjin in northern China is an excellent example. Workers there were ordered to take a half-day break for Covid-19 testing because officials were trying to curb the spread of the omicron variant.

According to Alex Hersham, general manager of digital freight forwarder Zencargo, truck throughput is now half of normal, and drivers must be tested daily before entering the port.

The city of Dalian is now also affected. Two people who traveled there from Tianjin had been confirmed with omicron.

Shanghai overload

According to shipping agents, Shanghai's traffic influx is causing container ship schedules to be delayed by about a week. These delays can then spread to already-loaded gateways in the United States and Europe, as schedules for on-time delivery at ports in importing countries are disrupted.

According to Hersham of Zencargo, ships may soon begin to overpass Chinese ports due to a lack of options. However, this is likely to be a temporary issue that will intensify because of the New Year holiday period in the country.

The Chinese authorities are facing losses because of strict quarantine measures. If the official policy of strict counteraction to the coronavirus does not change in Beijing, the rest of the world risks being left without Chinese raw materials and goods.

"The port congestion issue will continue to impact restocking cycles this quarter, alongside the Omicron breakout and the impending Chinese New Year closures in China," said Josh Brazil, vice president of supply chain insights at logistics intelligence firm Project44.

Against a backdrop of rising inflation, shortages of goods and components could push prices up, and resurgent demand by spring would have an additional effect on the consumer sector, even if the omicron wave had already receded by then. Half-empty counters would put the economy into deficit. Moreover, the scarcity effect would be even greater if the rest of the world began to break out of quarantine in the spring with empty supermarket shelves.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.