How Shanghai's lockdown will affect exports and how to solve this issue

Description

A COVID-19 outbreak in the city of Shanghai, China began on February 28, 2022. Part of the COVID-19 pandemic in China, the outbreak was caused by the Omicron variant and became the most widespread in Shanghai since the pandemic began two years prior. Authorities responded with mass COVID-19 testing and a strict lockdown of the city in an effort to uphold China's zero-COVID policy; the latter marked the largest one in the country since the lockdown of Hubei in early 2020. The outbreak caused substantial economic and social disruption across Shanghai with consequences felt elsewhere, and led to the spread of COVID-19 to other parts of China, including Beijing, Guangdong, and Hunan.

The closure measures due to the increasing Covid-19 cases in Shanghai, the largest city in China and one of the most important financial and trade centers in Asia, interrupt the logistics and supply chains, which are the lifeblood of both the world and China's economy. The sudden increase in cases with the spread of the Omicron variant in Shanghai since mid-March has caused a dilemma for local authorities between controlling the epidemic and meeting the basic needs of the city with a population of more than 26 million. Although Chinese online shopping platforms such as Alibaba, JD.com and Meituan are trying to reinforce their warehouses in Shanghai and increase the number of staff and couriers, they cannot work at full capacity due to virus measures. Closing an important trade, production and logistic center worldwide for weeks negatively affects the supply chains in many sectors at home and abroad.

Influences

Production disruptions

Due to the leaking of Omicron in Shanghai, many factories in Jiangsu and Zhejiang the location of most vinyl flooring factories, had to suspend production. What’s more, due to the quarantine measures, manufacturers still cannot predict how they will procure raw materials and parts and how they will be able to take their products out of the factory and put them on the market.

Logistic deadlock

Strict quarantine measures are disrupting road transport, which makes up the bulk of the logistics industry in China. Inter-city roads closed due to pandemic measures in Shanghai and other cities greatly reduce the amount of freight transported by land in the country, while transportation costs increase due to extended delivery times. Many cities and state governments require truck and lorry drivers entering their areas to submit a negative test, and this causes long queues of trucks at the city and state entrances and exits. Drivers passing through Shanghai and the northeastern province of Cilin state, where lockdown measures are in place, are required to stay in quarantine for two weeks for moving to other cities. According to data from the China Federation of Logistics & Purchasing, freight transport costs increased by 30% at the beginning of April compared to last year due to capacity reduction and long transport times.

Bottleneck in Shanghai Port

The disruption of truck and truck services also caused a bottleneck in Shanghai Port, where more than 50% of the container traffic is transferred by land. Although the port, which is the key transfer point of land, sea and air logistics, continues its activities despite the protection measures, many ships wait at the port to unload their cargo due to the absence of vehicles. The European Union Chamber of Commerce in China announced that it is estimated that the freight traffic at the Shanghai Port has decreased 40%compared to normal conditions. Air cargo traffic was also markedly reduced during the closure. According to data from flight tracking site VariFlight, 98% of scheduled flights to Shanghai's Hongqiao and Pudong airports on April 6-12 were cancelled.

Measure

Seeking alternative supply chains

China flooring factory's delivery schedule is currently being challenged due to the dynamic clearance policy in China. We are currently considering moving some of our production capacity to Our Mexico Factory to meet the challenge. Protex Mexico SPC Flooring factory has been built and is expected to put into production within this year

Seeking alternative logistics

Due to the Chinese government policy, there is currently a significant impact on the timeliness of all land transport logistics. A good alternative to Shanghai and Ningbo ports is via water barges. We try to get the cargo from shanghai and transport to other seaports like Ningbo，and also we try our best to send out cargo to other seaports. Some of our production bases they located in  Zhejiang or Jiangsu , they are convinced to transport the cargo to other seaport to deal with shipping problems.

Seeking alternative ports

With the increased congestion in Shanghai ports, the ports of Ningbo, Zhangjiagang and Xiamen are now sharing much of the pressure. Air flights are shifting more to Beijing and Shenzhen.

So in order to guarantee every order in our company to finish very well and to send cargo to our customers timely.

We want to tell all Protex customers that believe in us .We will try our best to guarantee your shipment