Carriers Diverting Shanghai Shipments as COVID Lockdown Continues

Shanghai container backlog due to COVID restrictions
Carriers are diverting and refusing Shanghai shipments as the backlog continues (file photo)

Published Apr 15, 2022 12:11 PM by The Maritime Executive

Three weeks into what was originally announced as a lockdown for a few days in Shanghai, China’s government has reiterated its zero-COVID policy prompting major shipping lines to advise customers to divert containers to other ports. A week ago, shipping lines warned that the port was running out of reefer plugs telling customers that they might not be able to offload their refrigerated containers.

“The situation in Shanghai has not improved since our last update,” Ocean Network Express (ONE) wrote in a new customer advisory issued on April 14. “Trucking remains limited and the terminals are still congested, whilst reefer yard plug capacity remains highly stressed. Considering this situation, ONE highly encourages customers to consider a change of destination to alternative ports to prevent delays and/or damage to your cargo, especially for time-sensitive commodities.”

Other major carriers are also reporting similar actions based on the uncertainties at the world’s business container port and the continued backlog of vessels waiting offshore. Maersk wrote to customers advising them that as of April 14 it had stopped all new reefer/dangerous cargo bookings into Shanghai until further notice.

The shipping companies’ announcements followed news that the central government would not relax its zero-COVID policy and while calling on companies to continue to move shipments said it would take further actions to stop the spread of COVID-19 both in Shanghai and southern China. This came in response to the news that Shanghai a city of 25 million people had set a new record on Thursday with more than 27,000 positive tests, but less than 10 percent of the people were reported to be symptomatic. As a whole, the government said that there had been just over 29,000 positive tests on April 14 in China again with less than 10 percent of individuals showing symptoms of the virus. China’s President Xi Jinping said that “persistence is victory” announcing that they would continue the current policies to slow the spread of the virus.

City officials in Shanghai highlighted that districts without cases of the virus were permitting residents to come out of their homes, but videos also surfaced on social media of China confiscating homes for new quarantine facilities and images of protests that were quickly deleted by the central government. Factories are remaining closed and most trucking to move containers is suspended but Reuters reported that Tesla was planning to reopen its factory near Shanghai on April 18.

Shipyards in southern China have also been forced to close. Last week, it emerged that three shipyards owned by China State Shipbuilding Corporation (CSSC) had been closed as early as mid-March with reports that the yards declared force majeure. There are indications that additional shipyards have taken similar actions delaying the delivery of new ships due to the COVID restrictions.

“The disinfection and quarantine measures have been implemented by local authorities to prevent the spread of COVID-19. Despite a stricter precautionary and control measures being taken, we remain fully operational to leave the least impact on your business with limited Work in Office Ratio and increased work-from-home mode,” Maersk wrote today, April 15 to customers. They, however, warned that “several vessels will be omitting Shanghai,” and as of April 13 the company’s office in another large port area, Ningbo, was closed until further notice as reports emerged of spreading lockdowns in China and outbreaks of the virus beyond Shanghai.

Faced with ongoing backlogs and uncertainties, ONE is advising customers that do not change the destinations or agree to have their cargo retained on board that the boxes “will be diverted to transshipment ports to be stored in the interim and will be transported to Shanghai once the situation permits.”

Economists are increasingly issuing cautionary notes about the potential impact of the latest lockdowns and disruptions to the global supply chain. In a recent report, ING warned that China’s COVID crisis could impact growth rates around the world. “A problem in China could be a problem for the global economy,” wrote chief economist Iris Pang.