Shanghai Lockdowns: What Does It Mean for Stateside Logistics?
As the Chinese government continues its staunch “zero-Covid” campaign, which includes lockdowns, mass testing, and alarms on residents’ doors to ensure compliance, these measures have brought one of the biggest financial and production hubs in the world to a near standstill. When the movement of goods and services stops in Shanghai, it affects the global supply chain, including the United States.
The percentage of all goods imported from China to the States is approximately 20%. This includes raw materials and finished products. For example, tech giant Apple is looking at a complete stop in production because of factory shutdowns. Not only does this mean a shortage of goods, but a rise in the cost to acquire them. Dylan Alperin, Head of Professional Services at Keelvar is quoted as saying “The freight cost for a single container from China to the U.S. went from $5,900 last year to $15,764 today.” This cost will most certainly be passed on to the consumer.
It’s not only an import issue. The U.S. exported more than 4.6 billion dollars of beef to China in 2021. Now, those shipments are sitting and waiting to be processed, but if the product can’t make it to market, these companies are going to take massive losses.
Worldwide, 20% of container ships are stuck in port, and it’s going to get worse before it gets better. Once restrictions ease, there will be a flood of goods and domestic ports will be overwhelmed once again.
Ryan Closser, Director of Network Enablement at FourKites, explains it succinctly: “The domestic freight market is going to have issues because there will be no freight to move. There will be no raw materials coming in from China to the U.S. so production could potentially shut down. So then say that China opens back up again and things are flowing through and they’re working through that backlog, there is then a crush of boats that starts toward ports again.”
Risk intelligence experts say that the US will be feeling the full weight of these disruptions this summer.
If you have any questions about how this may impact your cargo or your company’s logistics strategy, please contact your Bestway representative.