Shanghai is set to begin lifting Covid lockdown restrictions on June 1, and while this is a much-welcomed development for both citizens and corporations, it does come with further supply-chain complications.
For months, Shanghai and other cities in China faced grueling lockdown measures in accordance with China’s “zero-Covid” policy that included barricades, mass testing, and other intense measures that brought the production and financial hub to a standstill. For example, it is estimated that there are approximately 260,000 TEUs that were unable to be shipped out of Shanghai in April and will now hit the supply ecosystem, along with new cargo.
Vice Mayor Wu Qing had this to say, “We will fully support and organize the resumption of work and production of enterprises in various industries and fields.”
This means we may see even more congestion in the United States, even higher inflation before the bottleneck eases and cargo is moving at a reasonable speed, and freight rates are rising in response.
Freight rates to the US have risen by 6% in the last week.
Experts cite rising passenger numbers on still limited flights with passenger baggage restricting cargo space in aircraft, decreased demand for goods (or ability to acquire these goods) during the lockdown, and limited haulier availability.
However, the predictions are that once Shanghai has reopened, we’ll see a rebound effect that will result in more demand for goods, for cargo space, and that demand will result in flight frequency that could match pre-Covid numbers and availability to drive rates back down.
Analysts say the Shanghai ports are operating at approximately 90% of their total capacity, and while they’re not currently facing the congestion problems we are in the United States, with reopening, they soon will.
If you have questions about how this may affect your cargo, or any of the other supply chain situations we’ve been carefully monitoring here at Nelson, please reach out to your representative.