On Friday, Shanghai expanded restrictions in many parts of the city, which includes China’s financial hub and one of the world’s busiest ports. Experts said the port of Shanghai was already suffering from significant handicaps, and the extension could exacerbate congestion and increase transportation costs further.
The port city imposed a two-phase lockdown on its 25 million residents earlier this week. The authorities placed the western part of the city under lockdown on Friday, and extended the current lockdown in eastern neighborhoods with positive cases of up to to Nine days.
These restrictions caused significant delays in the port of Shanghai, Which is located in the eastern part of the city and was already crowded. It is the world’s busiest container port, handling more than four times the volume seen in port of Los Angeles in 2021, According to data from the port authorities in both cities.
VesselsValue, a global shipping data provider, said The number of ships waiting to be loaded or unloaded in Shanghai port rose to more than 300 this week, nearly fivefold in the past two and a half weeks.
“Congestion in Shanghai usually worsens at this time of year. However, the recent increase is significantly higher than both last year and normal seasonal levels,” the company said in a statement on Tuesday.
The company said it remains unclear what impact the shutdown will have on the backlog of ships at the port. But she noted that supply chain managers and analysts around the world are “starting to plan for spillovers.”
MaerskAnd the One of the world’s largest container shipping companies, also said the shutdown of Shanghai could cause transportation delays and higher costs.
Trucking service in and out [of] Shanghai will be severely affected by 30% due to the complete closure of the Pudong and Puxi districts of Shanghai.
“As a result, there will be a longer delivery time and a potential increase in transportation costs,” she added.
Meanwhile, the city government said shipments would remain normal under the lockdown.
The Shanghai International Port Group, which operates the port, said last month it would implement a “closed-loop system” that requires employees to stay in designated areas and adhere to certain protocols to prevent the spread of the coronavirus.
Congestion in Shanghai is bad news for consumers and businesses around the world.
“The citywide shutdown in Shanghai is a setback for global supply chains already stretched by geopolitical tensions,” Pansi Madhavani, chief economist at ANZ Research, wrote in a report on Friday.
Global supply chains have been strained for several months by the COVID-19 pandemic and Russia’s invasion of Ukraine.
Although the Shanghai port is still operating, activities such as warehousing and staffing will be affected, causing delays, he said, adding that cross-country transportation may also be hampered.
“These restrictions… may lead to higher freight rates,” Madhavani said.
Nomura analysts also expect “additional shipping delays, port congestion and a lack of logistical capacity” as Shanghai remains in lockdown.
“The markets have so far underestimated the gravity of the situation in China,” Nomura analysts said Thursday in a research note. “In the next two months, we expect global investors to better reflect these shocks in their assessments of various asset classes.”
The Beijing bureau of CNN contributed to this report.
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