Truth, Inspiration, Hope.

Omicron Worsens the Supply Chain Crisis

Jonathan loves talking politics, economics and philosophy. He carries unique perspectives on everything making him a rather odd mix of liberal-conservative with a streak of independent Austrian thought.
Published: January 25, 2022
Omicron is creating more disruptions to already stressed supply chains.
Omicron is creating more disruptions to already stressed supply chains. (Image: Pexels via Pixabay)

Ever since the COVID-19 pandemic broke out, many factories have shut down, and supply chain schedules have been disrupted. Now, the spread of the Omicron variant has added more stress to the struggling supply chains. 

A big contributor to this crisis is the supply chain in China, the world’s biggest manufacturer. The Chinese communist regime has adopted a zero-COVID policy. The regime implements very strict restrictions to contain any COVID-19 outbreak no matter what it might cost the economy.

Several port regions in China have seen Omicron outbreaks in recent weeks and their operations have stopped or have been severely interrupted as authorities tried to contain the surge. Many port shutdowns have affected supply chains, causing delays in product shipments. Key port cities of Ningbo, Tianjin, and Shenzhen have been affected.

“Although ports are still open, current restrictions – like mandatory quarantines and testing – continue to slow down transport and cause delays… Products are piling up while ships are banned entry. Between negative PCR-test requirements and last-minute re-routing, 2022 is starting off like 2021 ended – chaos,” Atul Vashistha told CNBC. Vashistha is the founder and chairman of the supply chain consultancy group Supply Wisdom. 

The Chinese regime is currently focusing on restricting the spread of COVID-19 as much as possible since Beijing will soon be hosting the Winter Olympics in February, he added.

The supply chain disruptions in China impact other parts of the world. The Jan. 20 reading of the Kiel Institute for the World Economy’s Trade Indicator showed that important trading routes between Asia and Europe have 15 percent fewer goods moving through them when compared to normal periods. Such a big decrease existed in the middle of 2020 when the world was grappling with the first wave of COVID-19 infections.

“The omicron outbreak in China and the Chinese government’s containment attempts through hard lockdowns and plant closures are likely to have a negative impact on Europe in the spring… This is also supported by the fact that the amount of global goods stuck on container ships recently increased again,” Vincent Stamer, head of the Kiel Trade Indicator, said in a recent post.

Ninety percent of global goods are transported by shipping. The port congestion and supply snags have affected the cost of sea transportation. According to the World Container Index, the shipping cost for the week ending Jan. 20 was $9,698.33 per 40-foot container. This is an 82 percent increase when compared to the same time last year.

In an interview with The Epoch Times, Prof. Frank Tian Xie from the University of South Carolina, Aiken, stated that the experts from the shipping industry do not expect supply chain bottlenecks to ease anytime this year. The crisis might even continue in 2023, which will only boost inflationary pressures. Port congestion is a key factor behind rising prices, he added.

“The epidemic led to tough restrictions in many countries, including the United States… As a result, a large number of dock workers and truckers were prevented from going out to work. However, as countries begin their economic recovery, the public’s purchasing power is strongly bouncing back; and demand for products from China and other Asian nations will rise significantly,” Frank said.

Josh Brazil is the vice president of supply chain insights at the logistics intelligence firm project44. In an interview with Bloomberg, Brazil also agreed that inflationary pressures might remain for some time. 

“The port congestion issue will continue to impact restocking cycles this quarter, alongside the Omicron breakout and the impending Chinese New Year closures in China,” he said.