China reverses zero-Covid policy, infections spread rapidly

China has backed off on its zero-Covid policy, trying to loosen regulations to boost supply chain security in the week leading up to Lunar New Year. Due to recent outbreaks of Covid-19, worker shortages and factory closures have become the latest disruptions to hit China’s supply chains. Considering the precipitous drop in demand for Chinese manufactured goods, many factories and logistics companies have decided to start the new year holiday early.

On top of the demand drop hitting manufacturers, some factories may also be forced to slow production due to a lack of components from suppliers and raw materials. As demand drops off, the ocean carriers will be blanking sailings to keep prices up to more attractive levels, artificially taking capacity out of the market. That behavior will cause even more issues getting components, raw materials, and inventory due to infrequent consistency in shipping. The only silver lining is that, with destination markets winding down for Christmas, China’s orders are seasonally significantly down so the reduction should be less painful.

As we look toward 2023, the softening ocean market will cause some upheaval as carriers pull out all the stops, literally. There’s no complete forecast or report on which sailings will be blanked, what cargo will be rolled or how long it will last. While most expectations are that the general reset provided by Lunar New Year will be the stabilizing factor, anything that can go wrong likely will.

In times of uncertainty, you need an experienced logistics partner. If you’re ready to take control of your shipping in the new year, contact your Nelson International representative and learn more about our customized cargo solutions.