The First quarter of 2022 witnessed another wave of Covid flareups in China. As early reported, despite China’s pre-emptive efforts, the infectious Omicron variant has been spreading in some major cities, which is seen as the most challenging Covid breakout since the start of the pandemic back in 2020, with four-digit new infections on daily basis. By the end of March, Shanghai and Jilin, a Northeast province in China, reported vast majority of new cases.
How China is dealing with the situation
Confronting the surge of positive cases, China continues to utilise its dynamic zero-Covid policy and prioritising people’s life and welfare above all else in combating the pandemic.
In early March, four large cities were in lock down and Shenzhen, China’s Silicon Valley and Tech Hub, was one of them. During its lockdown period (14-20 March), millions of residents were asked to go through NAT to detect the virus at the early stage, in efforts to contain the spread.
Shanghai has also been heavily hit and witnessed a continuous growth on daily new asymptomatic cases reaching 6311 on April 1st.
Given this context, local authorities have imposed a lockdown in the city with the plan to lift on April 5, 2022. Shanghai ports (Waigaoqiao and Yangshan) are currently working as per normal though, including vessel operations, yard handling and gate-in-and-out. Up to April 2, Maersk has not omitted any of its Shanghai calls or diverted calls to other ports due to Covid.
On the other hand, warehouse in the lockdown area is seriously impacted. It is foreseeable that the efficiency of Maersk trucking services from/to Shanghai will be further impacted due to the lockdown and we are providing multi-modal services via barge and rail as alternative solutions between Shanghai and nearby cities.
For airfreight, gateway operations are normal in Shanghai. However with more airlines cancelling flights for the coming days, more volumes will be shifted to other airports in China, including Zhengzhou and Beijing.
Solutions at hand
In continued support to businesses throughout this difficult period, the government has unveiled an array of relief measures for businesses aiming to mitigate impacts on the economic and social development in a timely manner.
On 15 Mar, the national health commission released a new Diagnosis and Treatment Plan for Covid. The 9th edition has adjusted the management of release from isolation and discharge criteria, with isolation management and post-discharge going from 14 days to 7 days, optimizing the measures and actions in combating the virus.
On the other hand, Chinese authorities have voiced their determination to keep supply chains moving, as shown in the approach to keep ports and terminals operational.
How will this Affect Trade?
The situation in China will cast a challenge onto the global supply chain recovery. The pandemic has revealed how lean the supply chain has become and any small disruption in the country will likely lead to ripple effects across the world.
Local lockdowns and other quarantine measures especially those surrounding Shanghai cause supply chain bottle necks primarily stemming from the trucking capacity shortage. Overall all terminals continue working as per normal with minor congestion caused by bad weather. Major impact is still at customer landside operation (factory, warehouse and trucking) where positive cases identified. Urgent support measures were implemented to help truckers to get back to business. Haulage services are back to normal in other ports in China.
At this point, domestic railway service has not been severely impacted which just requires planning in advance as the anti-epidemic policy mainly affects last/first mile operations. there will be noticeable drop-in trucking services between Shenzhen and nearby cities due to stricter Covid-19 controls and need for drivers to have frequent NAT leading to longer delivery times and higher transport costs. In Hong Kong, together checks and tests on cross-boundary truckers have led to a cut of at least 70% in trucking capacity, which in turn is having a domino effect in the rest of the supply chain. The same challenge also applies to Shanghai for inter-provincial pick-up and drop-off.
Air freight also is affected, as airlines reduce the frequency of flights due to a decline in demand. Airlines are frequently adjusting their schedules to adapt to these impacts and fluctuation in volumes in recent weeks. Authorities have rerouted international passengers flight bound for Shanghai to other cities, with at least 106 flights scheduled to be delivered through May 1.
What Maersk is doing to handle the situation?
Whilst manufacturing also takes place in other parts of the country, delays will still affect output, though not drastically and Maersk has always been working around the clock trying to mitigate the impacts on our customers by providing favourable terms and flexibility.
Our Focus is on our customers. The situation develops from day to day, and we are in contact with our customers to understand their needs and how we can help them. Right now, the various terminals and ports in the area are still open and there’s no direct impact on our daily operations.
For example, when the government put Shenzhen under a week-long lock down, Maersk has made an agilely decision that amendment fee together with Bill Landing release and Late Payment Fee will not be applied to the clients affected in Shenzhen. Now with the lift of lockdown policy in Shenzhen, all the depots and warehouses have been re-opened on 20 March together with air freight, shipment in full operation.
In light of lock down situation in Shanghai, Maersk also released certain Relief Package including offering Free change of destination on import cargo into Shanghai port, that has ETA from April 1 to April 15; Free destination and demurrage on cancelled export shipments from Shanghai with ETD March 28 to April 5; Free amendment/cancellation for SPOT and shipment exported from or imported into Shanghai, with ETD 1 April to 5 April, for export, and ETA, 1 April to 5 April for import etc. You could find more and detailed information from Shanghai Situation Update: Relief Package for Customers.
While Shanghai is going through tough residential lock downs the Shanghai ports - Waigaoqiao and Yangshan - are currently working as normal on vessel operations, yard handling and gate-in-and-out, and I expect same to continue - however landside transportation efficiency is reduced due to availability of truckers. We are doing everything we can to alleviate our customers pains by increasing our activities on rail and barges and will continue to follow this rather fluid situation closely!
Taking into the air freight impact into consideration, Maersk is also introducing a new Zhengzhou-Liege weekly return charter service starting in April to help customers adjust to recent capacity reductions to Europe. The service will provide connections to major China and European cities through our seamless transfer service.
In responding to the overall Covid-19 Situation recently, Anne comments in a very positive way and said: “It’s important to say that things are developing daily. China has learned a lot from covid-19 during the past two years. We have seen a change in the approach where infected employees have been isolated concurrent with testing terminal workers and truck drivers. This is also what is happening now. All the terminals are operational without experiencing delays”
Maersk is closely monitoring the situation and will keep our customer update timely if there is any big change. If you have got any questions, please approach Maersk local professionals for further information.