BEIJING. Trucks are delayed due to driver checks. Container rates are rising as ships wait in ports for many hours. Goods are accumulated in warehouses.
As Chinese officials struggle to contain the country’s worst Covid-19 outbreak since early 2020, they are imposing lockdowns and restrictions that add chaos to global supply chains. The measures in China, which accounts for about a third of global production, are disrupting the production of finished goods such as Toyota and Volkswagen cars and Apple’s iPhones, as well as components such as circuit boards and computer cables.
On Tuesday, the number of cases rose to more than 5,000 new infections across the country. This figure is low compared to many other large countries. But China is taking a zero-tolerance approach to outbreaks, which calls for strict restrictions as well as mass testing and quarantines at government facilities. As several of the country’s largest industrial cities are currently battling outbreaks, such measures are hurting factory and transport networks that are the backbone of China’s manufacturing as well as the global economy.
After rising last week, oil prices fell about 5 percent in early trading on Monday, in part on fears of a slowdown in China. And the economic damage already done by rising numbers of cases in China and a tough government response could get worse.
Officials in Beijing and an ever-growing list of cities and provinces say the virus is still spreading and that the government must take ever-tougher measures to stop it.
“Recently, localized cluster epidemics have occurred in many places in our country, mostly of the micron variant, which has spread rapidly and is very covert,” Mi Feng, spokesman for the National Health and Health Commission, said on Tuesday. “Prevention and control of the epidemic is more difficult, and the situation is difficult and difficult.”
In northeast China’s Jilin province, which has the highest number of new cases and many auto and auto parts factories, Zhang Li, deputy director of the provincial health department, said residents and officials will need to “urgently mobilize and overcome difficulties.” with clenched teeth – we run with time.
For some foreign investors, the outbreak itself may be less unnerving than the unpredictability of government measures. “Business risk in China is now higher than at any time since late spring 2020,” said Julian McCormack, chairman of the British Chamber of Commerce in China.
The lockdowns have also shut down electronics factories in the south and a number of industrial companies in central China. Cities near Shanghai have closed highway exits or required every driver to test negative for a PCR test — demands that have also created miles-long queues of trucks trying to transport critical components between factories.
High international shipping costs, a major problem last year that fueled inflation in the United States, are back on the rise after falling during Chinese New Year last month.
The cost to ship a container of goods from Asia to the US West Coast rose to $16,353 as of last Friday, before the latest coronavirus-related restrictions took effect, from $16,155 a week earlier. Fares have almost tripled from last year and are up 12 times from two years earlier, according to data from Freightos, a cargo booking platform.
Ports in China now require workers to live and work on the docks for two months away from their families to prevent infection. This has allowed ports to continue operating even during sustained outbreaks, in contrast to severe shipping delays last spring and summer, when infections forced the closure of large container terminals in Shenzhen and near Shanghai.
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March 15, 2022 10:11 am ET
But with truck traffic to the docks interrupted, ships are facing port delays of at least 12 hours and may soon have to wait up to two weeks, said Julie Gerdeman, chief executive of Everstream Analytics, a chain analysis firm. supplies. .
“These new lockdowns in China will affect even the most prepared businesses as supply chain flexibility is minimal,” she said.
Air travel is also facing new challenges. The Civil Aviation Authority of China said on Tuesday that many of the remaining international flights to Shanghai’s huge Pudong Airport will be diverted to other cities in China from next Monday until May 1. The measure will free up quarantine rooms in Shanghai for city residents and close contacts. but further delays exports.
At least five major factory cities have closed completely due to the coronavirus: Dongguan and Shenzhen in southern China near Hong Kong, where Foxconn has huge factories manufacturing iPhones and other Apple products; Changchun and Jilin City in Jilin Province in northeast China; and Langfang, near Beijing. Some smaller cities, such as Suifenhe and Manchuria on China’s border with Russia, have also been closed.
In Dongguan, an industrial city of 7.5 million, some factory owners said they are still allowed to work as long as their workers live in dormitories inside the factory complexes, and no one is allowed to leave or enter.
Deng Shiwen, owner of a small packaging materials factory in Dongguan, said several dozen of his employees still live and work on the compound, but he can’t send anything to customers.
“I’ll just leave the recently made things here,” he said.
Other cities, notably Shanghai, have not announced citywide lockdowns but have closed so many neighborhoods, malls and industrial parks, at least temporarily, that companies are encouraging employees to work from home as much as possible.
Hour after hour on Monday and Tuesday, the list of companies announcing a suspension of production due to quarantine grew. Toyota and Volkswagen have shut down their assembly plants and other factories in Changchun. PCB manufacturer Unimicron Technology in Shenzhen. Global Lighting Technologies, a light emitting diode or LED manufacturer based in Shanghai.
Some companies, such as Foxconn, have said they will try to move production to other plants. But Mary E. Lovely, a senior fellow at the Peterson Institute for International Economics, said it seems “hard to believe” that Foxconn will have slack at other facilities that could accommodate the company’s vast operations near Hong Kong.
After all, Foxconn and others are likely to favor certain large customers, such as Apple. “So you’re going to see the same thing you’ve seen before, which is that smaller companies that depend on these imported parts and equipment from China will suffer,” Ms Lovely said.
“You know that China will do everything possible to bring the situation under control. The question is which is stronger, the Chinese government or the virus,” she said, adding: “We know that Omicron is a pretty formidable adversary.”
Ana Swanson, Li Yu and Joy Dong contributed to the reports and research.