China is currently battling the worst covid-19 outbreak since the start of the pandemic, and it is now hitting the country’s many factories, which produce goods for the entire world.
The transport sector is also affected by strict restrictions, and according to Claus Thomsen, head of the Danish logistics company DSV in China and Asia, this creates concern in the industry.
To TV 2, he says, “There’s a concern. There have already been problems in the last two years so it doesn’t take much for it all to be pushed more.”
The consequence may be longer delivery times and more expensive goods for Danish consumers, who are already affected by rising inflation and high energy prices due to the war in Ukraine.
“In terms of price, we have not seen the same levels of air freight as in 2020 and 2021, but this is a situation that is constantly changing. In the long run, it will probably spread to consumers,” Claus Thomsen says.
Since the start of the pandemic, the Chinese government has pursued a tough strategy of zero tolerance for covid-19, and it is now being challenged by the infectious Omikron variant. It is costly for the economy to try to contain the infection, which has spread to 28 provinces in the big country.
The new wave of infections across the country is also making it hard for companies that have to ship their products overseas. Claus Thomsen and his employees in Shanghai are constantly following developments and trying to adjust, for example, from sea freight to air freight when bottlenecks occur.
“If we look back at the past week, we see an impact on the market. After all, part of the production comes from Zhejiang Province and Jiangsu Province, and there are problems with transportation from the factories to the port of Shanghai. For example, drivers could drive from Zhejiang to the port, but could risk a seven-day quarantine when they returned to the province,” Claus Thomsen explains.
In the last few years, the world’s supply chains have been hit by, among other things, port closures, the global shortage of containers, bottleneck problems in the US, and the large container ship that was stuck in the Suez Canal caused major delays.
But according to Anne-Sophie Zerlang Karlsen, operations manager for Maersk in Asia and the Pacific region, it is far worse when interruptions occur in China.
Last summer, the Yantian Port of Shenzhen in southern China closed for three weeks due to a single case of infection, causing a major shock to supply chains.
“It was actually more dramatic than Suez, although that story got more attention. Seven out of the world’s ten largest ports are located in China. They have been looking for other models and have found out that they are betting on the Ningbo model,” she tells TV 2.
Ningbo is another large port in southeastern China, where instead of closing the entire port due to a case of infection, test facilities were set up so that all employees and truck drivers could be tested every day.
This meant that the port ran at about 15 percent lower capacity for a few weeks, but it remained open. Now the Ningbo model is used in many other ports.
“They learn fantastically fast. This means that the ports are working. Many believe that the Port of Shanghai will be closed down, but we see no sign of that in Maersk. There may be a 10 percent decrease in capacity at the moment, but it is getting better day by day,” Anne-Sophie Zerlang Karlsen says and emphasizes that the situation can still change from one day to the next.