Lockdowns in China Block truck shipments and close factories

BEIJING — China’s increasing Covid-19 restrictions are causing further disruptions to global supply chains for consumer electronics, auto parts and other goods.

A growing number of Chinese cities are requiring truck drivers to undergo daily Covid PCR tests before being allowed to cross municipal boundaries, or quarantine drivers believed to be at risk of infection. The measures have limited how quickly drivers can move parts between factories and goods from factories to ports.

Shanghai and other major Chinese cities have imposed lengthy, strict lockdowns to try to contain the Covid outbreaks. Previous interruptions in the supply of goods from Chinese factories to buyers around the world were mainly related to the temporary closure of shipping ports, including in Shenzhen in southeastern China in May and June last year and then near Shanghai last summer. .

“The problem isn’t the ships, it’s that there’s no freight coming because there are no trucks,” said Jarrod Ward, director of business development for East Asia in the Shanghai office of Yusen Logistics, a major Japanese supply chain management company.

Truck driver testing has ceased as some cities conduct mass testing of residents. Shanghai essentially tested all 25 million people within its borders in one day on Monday and discovered a further 21,000 cases on Thursday.

Now there is a dire shortage of truck drivers in Shanghai and in nearby cities such as Kunshan, a center of electronics manufacturing. Many electronic component manufacturers are closing their doors in Kunshan.

“Apple and Tesla’s major electronics suppliers are all located there,” said Julie Gerdeman, the chief executive of Everstream, a supply chain risk management subsidiary of DHL based in San Marcos, California.

Apple declined to comment and Tesla had no immediate response to questions.

Many factories have tried to stay open by allowing workers to stay on site rather than go home. In some cities in northeast China, workers have been sleeping on mats on the floor for four weeks. Businesses have stored goods in nearby warehouses while waiting for normal truck traffic to resume.

But as lockdowns extend to cities like Shanghai, Changchun and Shenyang, factories are running out of materials to assemble. Some are sending their employees home until further notice.

For example, to make car seats, other springs, bolts and other materials are needed. Mr Ward said that car seat manufacturers have run out of parts. Volkswagen said the company has closed a factory outside Shanghai.

As Shanghai’s case count mounts, electronics manufacturing’s main rival, Shenzhen, has come out of lockdown. That is liberating workers and factories there to resume production at full speed.

Retailers and manufacturers in the West have tried to adapt to past supply chain problems in China by switching from ships to air freight, but air freight rates have more than doubled from last year.

The near-total suspension of passenger flights to and from Shanghai has roughly halved air cargo capacity there, said Zvi Schreiber, the CEO of Freightos, a freight booking platform. The war in Ukraine has forced many airlines to schedule longer flights around Russia and Ukraine, meaning each plane can make fewer trips in a week and often carry less weight on each flight.

The war in Ukraine is also beginning to hurt the availability of Soviet-era Antonov cargo ships, Mr Schreiber said. These workhorses of the air freight industry have been maintained almost entirely in recent years by Ukrainian maintenance bases that are now closed.

For businesses, additional disruptions to the global supply chain would come at a particularly fraught time, on top of rising raw material and shipping prices, along with longer delivery times and staff shortages.

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