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COVID Disruptions: China’s Port Closure Triggers Fears of Further Delays in The Global Supply Chain

Arvind Datta
Arvind is a recluse who prefers staying far away from the limelight as possible. Be that as it may, he keeps a close eye on what's happening and reports on it to keep people rightly informed.
Published: August 18, 2021
China shut down the Ningbo-Zhoushan port after an employee was found infected with COVID-19.
China shut down the Ningbo-Zhoushan port after an employee was found infected with COVID-19. (Image: Pexels via Pixabay)

China has partially closed the Meishan terminal of Ningbo-Zhoushan port, the world’s third busiest port. The closure was triggered after a worker at the site contracted COVID-19. The Meishan terminal services shipments to Europe and North America and is closed until further notice. The shutdown has caused fears of massive supply chain disruptions. This is yet another instance of a major Chinese port suspending activities in the country this year. In June, COVID-19 had affected activities at ports in Guangzhou and Shenzhen.

In a research note, Nick Marro, lead of global trade at Economist Intelligence Unit, stated that as long as Chinese authorities follow a zero-tolerance approach towards COVID-19, the risk of “sudden disruptions caused by testing or lockdowns will persist.” China has seen a resurgence in COVID-19 cases, with official data registering 140 daily infections on August 16, the highest number of daily infections since January.

“The company will actively negotiate with the shipowner … and reasonably divert the vessels due to call at Meidong (part of the Meishan bonded area) to other port areas,” Ningbo Zhoushan Port Co Ltd, said in a statement.

Other terminals are operating as normal. However, they are only accepting bookings for export-bound containers provided that such bookings are made within two days prior to the arrival of the vessels. This is being done to reduce backlogs as well as to restrict the number of people at the site. Last year, Meidong handled 5.44 million twenty-foot equivalent units (TEU), accounting for roughly 17 percent of the total container handling volume at Ningbo. 

Maersk, the world’s leading container line, announced that it will be rerouting a few vessels to other terminals in Ningbo. One vessel would skip docking at the port. Three vessels of Hapag-Lloyd will be skipping Ningbo this week. Over at the Shanghai port, authorities have tightened disinfection and quarantine procedures following the report of infection at Ningbo. Operations at the port have not been affected.

In an interview with CNBC, Dawn Tiura, CEO of Sourcing Industry Group, an association for the sourcing and procurement industry, stated that the June COVID-19 outbreak had forced Yantian port in Shenzhen to cut down exports by 70 percent, a decision that tripled the waiting time for processing shipments, up to nine days from the earlier three days. 

“If we experience something similar here, and the time to move ships through the port doubles or triples, we’ll see a substantial and long-term impact on exports that affects the holiday shopping season and furthers inflation… Container shortages were already straining global supply chains. Given that Ningbo-Zhoushan is the third-largest container port in the world, this shutdown makes an already bad situation much worse,” Tiura said.

In an interview with Washington Examiner, Peter St. Onge, the research fellow for economic policy at the Heritage Foundation, pointed out that since China is a major producer of intermediate goods that are used to produce the final goods in other nations, shutting down Chinese port traffic would have a significant effect on manufacturing sectors in other countries.

“For example, retail inventories in the U.S. are about a third lower than they are normally, and about 30% of companies, in general, are reporting supply chain disruptions — if that is isolated to manufacturing and construction, the figure is actually closer to 60%… The port closure, and potential future closures, would only add to that,” according to the media outlet.

Container prices have spiked in recent months. The benchmark cost of a shipping container from Shanghai to Los Angeles is now at $10,322, up 220 percent from the past year. The cost of shipping a box from Asia to the US West Coast now costs ten times more than it did prior to the COVID-19 outbreak. The Baltic Dry Index (BDI), which acts as a worldwide global benchmark for bulk shipping prices, is up by 10 percent as compared to last month.

In China’s current five-year plan, the Ningbo-Zhoushan port is mentioned as a jewel in its supply chain infrastructure. Local authorities have been asked to boost it as a “world-class port industry cluster,” building research centers, advanced facilities, and industries around the port. Last year, the port handled 283.2 million 20-foot equivalent units of container throughput. This was twice the volume handled by Rotterdam port in the Netherlands, the largest container hub in the Western Hemisphere.