Chinese government’s zero tolerance for Covid raises risk in supply chains
Ships that want to avoid delays because of the zero-tolerance policy for Covid-19 at China are changing route and heading straight for Shanghai, which increases congestion at the world’s largest container port, according to information from Bloomberg. The Asian country tries to contain the spread of the coronavirus with increased restrictions on the movement of people and mass testing. The expectation is that it will adopt more lockdowns in the coming weeks so that the Chinese New Year holiday, which takes place at the end of January, does not increase contamination and can impact on Winter Olympics, scheduled for February.
According to the Eurasia Group’s Top Risks 2022 report, the zero-tolerance policy will require more severe lockdowns, which will lead to economic disruption. The consultancy claims that shortages of staff, raw materials and equipment are likely to make goods less available. In practical terms, the measure generates congestion and delays that reduce the supply of ships and can contribute to keeping freight prices high. THE agribusiness ends up being impacted by increased risk in supply chains. Crops such as coffee, cotton and meat are the most exported by containers, according to a survey by the EsalqLog Group.
For 2022, the different sources I consulted did not rule out new episodes of congestion at ports or the risks of delays in the arrival of goods and delivery of products. According to Rafael Dantas, commercial director at Asia Shipping, new logistical disruptions should happen. “Always on Chinese New Year’s Eve, there is an intense flow because everyone has to send cargo or receive it in China. Despite this, we are not seeing a rocky start in China in 2022. The disruptions should happen after the Chinese New Year, which is when people gather, and the virus could spread. The Chinese holiday must be a milestone. Logistics will only normalize after the Covid situation normalizes. If Covid continues, we will continue to have problems.”
Perhaps in the second half there will be the beginning of an improvement in the picture, but it is only for 2023 that there is an expectation of normalization of logistics. “It certainly makes sense for normalization to take place from 2023 onwards. Some events can be anticipated. If the terminal ships and ports do not have major stoppages, it is likely that in the second half of the year there will be a drop in freight prices”, highlights Thiago Guilherme Péra, technical coordinator of the EsalqLog Group. Until then, we keep the possibility of surprises on the way.
*This text does not necessarily reflect the opinion of Jovem Pan.