Damage Mounts to Fragile Supply Chains From Shanghai Lockdown

Shanghai’s busy ports normally hum with activity as ships are loaded with goods heading to key export markets around the world.

But in the wake of China’s strict zero-Covid policy, the normally bustling city of Shanghai – home to over 25 million people and the economic powerhouse of China – has been forced into a coma-like state with residents ordered to stay home.  

The sealing off of one of the country’s most important cities is having a knock-on effect on global supply chains as staff are unable to load and unload vessels. Shanghai accounts for 10.4% of China's trade with the world, according to official statistics.

Britain’s Telegraph newspaper reports that over 500 ships are stuck outside Shanghai port. Trucks are unable to pick up or drop off shipments, leading to mounting storage and distribution problems. Some shipping companies, including Maersk, have started to avoid the congested port altogether.

Shanghai and the surrounding region is home to a number of major manufacturers with global impact.

A number of manufacturers in the region, including Tesla and Volkswagen have been forced to suspend operations for several weeks following the lockdown, which began on March 28. Many Volkswagen employees are reportedly stuck on site and the company has been keeping them entertained with daily walks, movie nights and group exercise activities, according to Autonews.

Meanwhile, technology company Pegatron, which produces Apple’s iphone, has also announced shutdowns because of the ongoing lockdown.

The shutdowns are causing widespread disruption to manufacturing companies globally.

More than 80% of manufacturers in China reported reduced production or supply chain disruptions, according to a recent survey conducted by Beijing-based American Chamber of Commerce in China. Nearly all (99%) of the surveyed manufacturers report that the lockdowns had affected them.

China has taken a strict zero-Covid approach to maintaining the virus but has been struggling to control the most recent outbreak of the more contagious Omicron variant. A recent CNN video news report shows mounting frustration on the streets as residents struggle to get food and cope with life under strict lockdown. 

China began the easing of restrictions in some areas of the city on Monday, according to Reuters, but the vast majority of the city’s residents remain under lockdown. Covid cases currently exceed 20,000 new cases per day.