Markets were braced for prolonged supply chain issues through 2022, but recently there were some reasons for optimism. Some experts think that was just a temporary reprieve, though, as strict COVID lockdowns in Shanghai and the looming threat of West Coast port workers going on strike could once again snarl ocean shipping.
Shanghai, home to the world’s largest container port, has been under lockdown since the end of last week. China also extended lockdowns in the eastern part of the city, home to the Shanghai port, where positive cases have been popping up.
Right now, there are more than 300 ships waiting to load at Shanghai’s port, which is approximately five times the normal volume.
“Congestion at Shanghai usually worsens this time of year,” shipping data provider VesselsValue told CNN in a statement. “However, the recent increase is far higher than both last year and normal seasonal levels.”
Additionally, the lockdowns will impact ground service once items are unloaded from ships.
“Trucking service in and out [of] Shanghai will be severely impacted by 30% due to a full lockdown on Shanghai’s Pudong and Puxi areas,” Maersk said in a statement, according to CNN. “Consequently, there will be longer delivery time and a possible rise in transport cost.”
“Even if strict lockdowns in Shanghai are lifted, U.S. ports will likely be slammed with a wave of pent-up cargo from newly reopened factories in China.” The question is when China re-opens https://t.co/sR0vdAxBUX
— Peter Tirschwell (@PeterTirschwell) April 24, 2022
The local Shanghai government originally said that freight operations would remain normal under the lockdown by using a “closed-loop system” that would require employees to stay in specific areas and follow additional safety protocols. But, obviously, truck drivers can’t adhere to that system, so longer waits at checkpoints and the issue of quarantine due to travel could still put a strain on delivery times.
Some expect U.S. ports to feel the impact of Shanghai’s port slowdowns beginning in July.
“We do forecast that to get a lot worse as we come into the summer months, particularly with what’s happening in the supply chain from an ocean perspective or in China coming inbound,” Shelley Simpson, chief commercial officer at trucking firm JB Hunt, said, according to Quartz. “We have had a lot of customers talk to us about that.”
That timeline happens to line up with when the International Longshore and Warehouse Union contract expires at the end of June.
“Every time there’s a contract up, things slow down,” truck driver Anthony Chilton told the New York Times. “We always blame the longshoremen. They slack off, take breaks, call in sick.”
Longshoremen say that they have no intention of slowing things down because of labor disputes, and are hopeful that the national attention their work has received will bring about a deal without the need for a strike.
“There’s too much at stake for both sides,” Mario Cordero, executive director of the Port of Long Beach, told the New York Times. “There’s an incentive because the nation is watching.”
Additional slowdowns at West Coast ports are the last thing the supply chain needs, especially with operations seemingly improving over the last few months. Lockdowns in China will prove to be a persistent issue, but if Southern California port workers can reach an agreement before their contract expires, it will prevent a worst-case scenario for port backlogs on the U.S. side.
