The queues of container ships outside major Chinese ports are
lengthening by the day as COVID-19 outbreaks in manufacturing export
hubs threaten to unleash a fresh wave of global supply chain shocks,
ship owners, logistics firms and analysts say.

China is experiencing its biggest spike in COVID-19 infections since
an initial outbreak in the central city of Wuhan was contained in
early 2020.

The spread of the highly-infectious Omicron variant this month has
led to movement controls across China, including in key
manufacturing hubs of Shenzhen and Dongguan, paralyzing factories
making goods from flash drives to car parts.

While China’s main ports remain open and vessels are continuing to
dock, congestion is building up and some container ships are re-
routing to avoid expected delays, according to ship owners, analysts
and supply chain managers.

Charter rates are expected to ramp up, while delays to shipping
freight grow longer, they said.

Supply chain crisis
Container loading is “decreasing massively” at Shenzhen''s Yantian
port, the world''s fourth largest container terminal, as port
workers, truckers and factory workers stayed at home, said Jasmine
Wall, Asia-Pacific manager at SEKO Logistics.

“This implies that it will become difficult to get cargo to and from
the ports and hence whether the terminals are open or not becomes a
moot point,” said Lars Jensen, CEO at Vespucci Maritime, a container
shipping advisor.

"It will have a disruptive impact on the supply chain - in turn
prolonging the current supply chain crisis.”

Currently there are 34 vessels off Shenzhen waiting to dock,
compared to an average of seven a year ago, according to Refinitiv
ship tracking data. At Qingdao, an eastern Chinese port city, there
are around 30 vessels waiting to dock compared to an average of
seven last year.

Charter rates per 40-foot container remain close to all-time highs
across major global shipping routes, trading at around $16,000 on
the China-U.S. West Coast route and nearly $13,000 from China to
Europe, according to Freightos shipping index.

"Whiplash effect"
Similar COVID lockdowns last year saw operations at Yantian cut to
one-third of capacity, leading to a bigger disruption of global
shipping than the one caused by the closure of the Suez Canal for
six days last year after the Ever Given container vessel ran
aground, a director of Maersk, the world''s largest container liner,
noted last year

Although supply chain experts say that Chinese ports are more
resilient now to staff shortages and transport disruptions, there
remains the fear that Yantian may have to shut if infections and
restrictions spread.

Supplier and shipping delays, while still elevated, had eased to
their lowest level since early 2021 in February, according to JP
Morgan Global PMI.

"If the (Yantian) port does close, then the whiplash effect when it
reopens will lay waste to all the progress made in the U.S.,” said
Bjorn Vang Jensen, vice president at consultancy Sea-Intelligence.

Even if ocean freight terminals remain open, the lack of truck
drivers and warehouse operators means there will be delays in
filling shipping containers and taking them to port.

Inflation
With other nearby export hubs also suffering from bottlenecks,
including Hong Kong and Shanghai, vessels may have to wait until
congestion eases to load cargo and that will mean phones,
televisions and toys take longer to get to the United States, said
Peter Sand, Chief Analyst at Xeneta, a freight analytics firm.

"I expect the consumers in the U.S. and shippers with cargo going
for North America will be hardest hit,” Sand said.

Shipping lines are also contending with the possibility of a rapid
escalation of Omicron variant COVID cases in China, as seen
elsewhere in the world, which could result in more widespread
disruptions and have implications for already rising global
inflation.

"The Chinese authorities’ zero-tolerance policy would seem to
indicate a high likelihood of further lockdowns,” said Niels
Rasmussen, Chief Shipping Analyst at BIMCO, a shipowner association.

"A slowdown in Chinese exports will exacerbate supply chain delays
and reduce inventories held by businesses, which could drive further
price increases."