Since early March, Beijing has announced the lockdown of several Chinese cities, including Shanghai, the world’s largest container port. Its closure has repercussions around the world, blocking the loading and unloading of hundreds of ships. A situation that once again demonstrates the fragility of the global supply system and the very high dependence of the European Union on China, while shortages could develop by the end of May.
It is one of the industrial and economic lungs of the country and is standing still. Since the end of March, the 25 million inhabitants of Shanghai have been locked up. And it’s not the only city affected. So China’s zero-covid policy has put 45 cities in the country, or about 400 million people, under glass, calculates economist Lu Ting of Nomura Holdings. Although the attention of Westerners today is focused on the Russian-Ukrainian conflict, the consequences of this drastic incarceration in China are nevertheless crucial. And in fact, Chinese ports are one of the essential cogs in global supply, with 90% of trade being by sea, according to the International Maritime Organization (IMO).
“We have exactly what we feared: a closure of the Chinese port system affecting global supplies. Shanghai is 44 million containers per year, or 250,000 per week. The delay is enormous.”, explains Paul Tourret, director of the Higher Institute of Maritime Economics (Isemar). Scott Gottlieb, a researcher at the American Enterprise Institute (AEI), shared a particularly striking map on Twitter. It shows hundreds and hundreds of commercial ships stranded in the port of Shanghai, waiting to be loaded or unloaded. In these containers: tires, clothing, inner tubes, consumer goods, some of which would supply France and Europe. Today, one in two containers arriving in Marseille comes from China.
With Shanghai in near-total lockdown, this is a map of the commercial vessels currently offshore waiting to be loaded and unloaded with goods; worsening global supply chain problems pic.twitter.com/Md6PtpF3VE
— Scott Gottlieb, MD (@ScottGottliebMD) Apr 18, 2022
“We are touching the source of the world’s stock here”
The situation is extremely tense, some experts say even worse than during the first Wuhan detention two years ago, which started it all. Shipping expert Jon Monroe predicts “many orders rejected” and a “overwhelming movement of goods” those shipping lines and ports will drown once the closures are lifted. “We are touching the source of the world supply here”“, deciphers Paul Tourret. “Globalization only works if maritime transport works. The blocking of the Suez Canal by the Ever Given last year showed that well,” adds the expert.
The specialist firm VesselsValue has also published a graph showing the magnitude of the crisis. Since the beginning of March, the date the Shanghai detention began, there has been an explosion in the number of ships waiting to be loaded or unloaded in the city’s port. Much more than in 2021. For the associate professor of commerce and finance at New York University Shanghai, Rodrigo Zeidan, who shared the message on Twitter, this crisis will cause continued inflation of tradable goods.
The lockdown in Shanghai is not easing at the moment. Port capacity continues to decline.
Inflation will be here for a while yet. The prices of many tradable commodities will take some time to stabilize. pic.twitter.com/xdP3is4Bwo
—Rodrigo Zeidan (@RodZeidan) Apr 19, 2022
The Zero-Covid Strategy Criticized
The situation is such that the European Union Chamber of Commerce has sent a letter to China to review its policies to fight Covid-19 for disrupting global trade too much, Reuters reveals. “The current measures taken to try and contain the recent outbreak of Covid-19 in China are causing significant disruptions ranging from logistics and manufacturing throughout the supply chain in China,” says the letter, signed by chamber speaker Jorg Wuttke.
Eric Zheng, president of the US Chamber of Commerce in Shanghai, also asks AFP: “Does the zero Covid strategy still work in the current context? That’s the big question, especially when you weigh it against the economic cost.” For the experts, the impact on France of this situation will be felt from the end of May. Especially since the period is crucial, unlike the first incarceration of February 2020, a month that is usually “soft” for Westerners after the end-of-the-year festivities.