How the blockade in China further silenced the supply chain

BEIJING – Growing restrictions in China Covid-19 is further disrupting global supply chains for consumer electronics, automotive parts and other goods.

An increasing number of Chinese cities are requiring truck drivers to perform daily Covid PCR tests before allowing them to cross municipal boundaries or quarantine drivers who are believed to be at risk of infection. The measures limited how quickly drivers could move components between factories and goods from factories to ports.

Shanghai and other major Chinese cities have imposed long, tight blockades to try to control Covid outbreaks. Previous disruptions in the supply of goods from Chinese factories to buyers around the world include mainly the temporary closure of shipping ports, including in Shenzhen in Southeast China last May and June last year and then near Shanghai last summer.

“The problem is not in the ships – it’s that there are no loads because there are no trucks,” said Jarod Ward, East Asia’s chief business development director, at the Shanghai office of Yusen Logistics, a large Japanese supply chain management company.

Testing of truck drivers has been postponed because some cities are conducting mass tests of residents. Shanghai tested essentially all 25 million people within its borders in one day on Monday and found another 21,000 cases on Thursday.

There is now an acute shortage of truck drivers in Shanghai and nearby cities such as Kunshan, an electronics manufacturing hub. Many electronic component manufacturers are closing in Kunshan.

“Apple’s main electronics suppliers for Tesla are all based there,” said Julie Gerdeman, chief executive of Everstream, a risk management subsidiary in DHL’s supply chain based in San Marcos, California.

Apple declined to comment, and Tesla did not have an immediate answer to questions.

Many factories tried to stay open by forcing workers to stay put instead of going home. Employees have been sleeping on floor mats for four weeks in some cities in northeast China. The companies are storing goods in nearby warehouses while they wait for normal truck traffic to resume.

But as the blockade stretches to cities such as Shanghai, Changchun and Shenyang, factories are beginning to run out of assembly materials. Some send their workers home to another order.

Making car seats, for example, requires various springs, bolts and other materials. Mr Ward said car seat manufacturers had run out of components. Volkswagen has said it has closed a factory outside Shanghai.

As the number of cases in Shanghai increased, its main rival in the electronics industry, Shenzhen, emerged from the blockade. This frees the workers and factories there to resume production at full speed.

Retailers and Western manufacturers have tried to adapt to previous difficulties in China’s supply chain by moving from ships to air transport, but air transport rates have more than doubled since last year.

The near-complete cessation of passenger flights in and out of Shanghai has halved air travel capacity there, said Zvi Schreiber, chief executive of Freightos, a cargo reservation platform. The war in Ukraine has forced many airlines to plan longer flights around Russia and Ukraine, which means that each plane can make fewer trips in a week and can often carry less weight on each flight.

The war in Ukraine is also beginning to damage the availability of Soviet-era Antonov cargo ships, Mr Schreiber said. These workhorses of the air transport industry have been maintained in recent years almost entirely by Ukrainian maintenance bases, which are now closed.

For companies, any additional disruptions in the global supply chain could come at a particularly difficult time, along with rising raw material and delivery prices, along with extended delivery times and labor shortages.

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