Fresh new lockdowns in Chinese port cities will worsen the world’s supply chain problems. As new Omicron cases appear in China, the country’s hardline “Zero COVID” policy can further strain the flow of goods worldwide.
Two Port Cities Report Outbreak of Cases
Last Thursday, the Chinese port city of Dalian reported its first COVID Omicron case. Almost immediately, companies feared that the Beijing government would shut down the Dalian port in order to isolate the virus. Dalian is the second major port after Tianjin reported an outbreak of Omicron cases a few days earlier.
Tianjin, China's northern port city, reported a rash of COVID cases last week, prompting a strong response from the government.
Located about 62 miles from the capital Beijing, Tianjin reported 41 domestically transmitted infections with confirmed symptoms last Wednesday.
As a result, major manufacturers are shutting down their plants to prevent the further spread of the virus. Meanwhile, ports are having trouble keeping up with demand, as workers remain in short supply.
In addition, city officials imposed semi-lockdowns and travel restrictions. Tianjin’s health officials will test all 14 million citizens, which can take some time. Consequently, major manufacturers such as Toyota and Volkswagen suspended their production schedules.
New China Lockdowns Can Worsen Global Supply Chain Problems
The spread of Omicron to a second Chinese port city caused many governments, including the US, to worry. More port delays from the manufacturing powerhouse can lead to even more delays in shipments all over.
In fact, Frederic Neumann, economics research co-head of HSBC, warned clients about the new China lockdowns. He said that the world could face the “mother of all supply-chain stumbles” this year.
Meanwhile, the United States feared that the new China lockdowns could add more supply chain problems. Last Tuesday, Federal Reserve chairman Jerome Powell warned lawmakers of the effects of shutdowns in Chinese port cities. “If China sticks to a no-COVID policy, Omicron can really disturb the supply chains again,” he said.
After The Holiday Season, It’s Lunar New Year For China
Thankfully, the holiday season for the US and most countries is over. This means less pressure in getting goods and supplies into American shores in time.
In addition, many Chinese factories and logistics firms tend to slow down this time of year. The Chinese Lunar New Year is just around the corner, which means many workers will be home for the holidays.
That is if the Chinese government will allow travel between cities. The country’s zero-tolerance lockdowns are keeping COVID infections at bay.
However, this all comes with a price. Even as China manages to keep coronavirus cases down, the rest of the world will have to make do with limited supply runs.
In northern Xi’an, Samsung and Micron already suspended operations at their plants. In particular, Samsung said that they will leverage their global manufacturing network to make up for the shortfall.
Meanwhile, Foxconn, a major Apple supplier, is facing a similar shutdown. Dozens of local COVID cases surfaced in Zhengzhou, where Foxconn operates its plant.
So far, production remains normal However, the nearby city of Anyong already announced a shutdown and issued stay-at-home orders for its 5 million residents.
It’s A Matter of Time
So far, port operations for Tianjin and Dalian remain normal despite the increasing number of cases. Shipping giant Maersk said they have yet to experience any disruptions in Tianjin.
However, the company did report delays in Ningbo port south of Shanghai due to a current outbreak of COVID cases.
Watch the CNBC News video reporting that China imposes lockdowns on the third city to contain COVID spread:
Do you foresee more supply disruptions in the US now that China is experiencing outbreaks yet again? When do you see global supply chain problems coming to an end?
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