Covid-19 containment measures in Shanghai are causing increasing disruption to supply chains, with shipping and logistics firms warning of diverted cargoes, container congestion and blank sailings. 

China’s largest city has experienced by far its largest outbreak of confirmed cases since the start of the pandemic, prompting strict virus containment measures from authorities. A total lockdown was imposed on April 5, and though restrictions are already being relaxed slightly, the full impact on trade is still unfolding. 

Maersk issued an advisory this week saying “several vessels will be omitting Shanghai” due to a shortage of available container space at the port, particularly for specialist and refrigerated cargoes. 

“Due to the impact of the lockdown, we have seen an increased yard density for dangerous goods and reefer containers in Shanghai terminals,” it says. “We recommend customers, when possible, to ship or divert the cargo to other Chinese destinations or other markets in order to avoid the congested port.” 

CMA CGM has also recommended that cargo owners “anticipate potential issues and identify re-routing options”, again focusing on refrigerated goods. It says shipments risk being denied for discharge at the last minute due to limited capacity for electrical supply. 

And MSC says Shanghai port is experiencing “considerable congestion, resulting in low or, at times, no availability of plugs for reefer containers”, which may result in damage to the cargo. 

MSC has also given notice that empty containers are to be shipped from China to ports in northern Europe and the western Mediterranean. A statement from Crane Worldwide Logistics issued on April 13 says ocean carriers “are increasingly omitting Shanghai calls and preparing to announce more blank sailings”. 

“Depending on how long the lockdown continues, the lines may need to look at idling ships for a while,” Crane Worldwide Logistics adds. Figures from Bloomberg suggest that as many as 500 ships are currently anchored off the Chinese coast. 

The disruption follows warnings from trade experts last year that China’s zero-Covid policy could severely hamper vessel and container availability if ports were closed, extending delays and pushing freight rates higher. 

However, events have unfolded slightly differently in reality. The port has remained operational, with Shanghai International Port Group issuing a statement saying staff were staying on site overnight to ensure operations could continue. 

Instead, the issues stem from the impact on road travel once containers have been unloaded. CMA CGM’s statement says shortages in trucking capacity have meant cargoes are suffering “drastically slower pick-up time and therefore excessively stretched dwell time”. 

Maersk says drivers are still able to reach warehouses in Shenzhen, Ningbo, Xiamen and Qingdao, but must hold proof of a negative Covid-19 test. With Ningbo also reporting sporadic cases, there are fears restrictions could be expanded, further complicating those journeys. 

In the immediate term, the disruption could result in further costs to parties involved in trade transactions. 

MSC said last week that change of destination fees will apply if containers are diverted away from Shanghai, though some carriers such as Maersk have since waived those charges temporarily. 

Maersk is also offering free detention and demurrage on cancelled export shipments from Shanghai as part of a relief package for its customers. 

However, the congestion in Shanghai adds to longer-term concerns over disruption to global supply chains, in part attributed to an imbalance between supply and demand during 2021 as economic recovery took place at different speeds in different regions of the world. 

Data from Sea-Intelligence shows around 12% of container vessel capacity was lost in February as a result of delays. 

Freight rates for shipments from Asia to Europe have fluctuated over the past year, with spot rates dropping to around US$11,000 as of April 8, according to figures from shipping analytics platform Xeneta – a decline of around 25% from December’s peak.