Weekly Update – 27.05.2022

Weekly Update – 27.05.2022
May 27, 2022 Hannah Marshallsay

Shanghai begins its staged reopening, just as the port city of Tianjin is put into lockdown. The outlook for exports from China remains uncertain with port congestion expected as we move into the peak season.

Shanghai, which is working towards an exit from lockdown on June 1st, has begun relaxing its covid restrictions. People in some residential areas have been permitted to leave their homes with some public transport services resuming. More factories are reopening, upon approval, in the areas around Shanghai. The port, terminals, warehouses and trucking services are being operated by a reduced workforce and as a result there is still a reduction in cargo arriving at Shanghai ports. Shipping lines are continuing to blank sailings from Shanghai into June and until the lockdown is fully lifted and operations return to more regular levels. All normal activities are expected to proceed by mid-late June in Shanghai if there is no increase in the number of positive cases and the risk of a rebound in infection is controlled. 

Meanwhile authorities in the northern port city of Tianjin have initiated a new round of city-wide testing on Wednesday this week after 36 news cases were reported. The lockdown is requiring its 14 million residents to keep their movements largely close to where they live during the testing period. Some factories are closed but the port is fully operational, nevertheless carriers have cancelled many vessels, causing delays and blank sailings at Xingang port. 

While factory production remains low and with too little cargo arriving at ports, shipping lines will continue to announce blank sailings from China in the coming weeks.

This is a summary of the key areas in China that are currently being impacted by Covid control measures:

The Outlook for Exports From China Remains Uncertain

Looking further ahead, it is expected that once the lockdowns are lifted there will be a surge in demand, especially as manufacturers try to clear their backlog of orders. This is likely to lead to temporary port congestion in China which may take a number of weeks to clear. There is the possibility that if the lockdown rules are relaxed soon and truckers are allowed to return to normal working, those backlogs will arrive at the same time as peak season orders. In this scenario, we would expect supply chain blockages at ports initially in China and then following on to ports in the UK, Europe and the US as we saw last year. 

However there is also the possibility of a drop in demand as rising inflation hits consumer confidence in the UK, Europe and the US that could help offset any sudden rush of cargo from China. As a result of these factors, the outlook for cargo exports from China remains uncertain.

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