Port shutdowns amid delta variant’s spread weigh heavily on strained global supply chains

The partial shutdown at the world’s third busiest port, Ningbo-Zhoushan, has reduced the port’s capacity by a fifth raising fears that ocean shipping bottlenecks could continue until next year, threatening global economic growth. Delays and soaring transportation costs could cause a severe shortage of materials leaving demands unmet, ultimately leading to inflation.

All inbound and outbound container services at the Meishan terminal in China’s Ningbo-Zhoushan port were halted last Wednesday until further notice after an employee tested positive for coronavirus. The latest shutdown follows a three-week-long closure of the Yantian terminal in Shenzhen, in May, after a COVID-19 outbreak, affecting international shipping.

Financial Times (FT) reported that shipping costs have soared to about $15,800 to move a 40-foot container from China to the US west coast, marking a tenfold jump on pre-pandemic levels and up by half last month. Importers and exporters are struggling to recoup these shipping costs.

The shutdown of the Suez Canal in March has also strained the shipping industry which is scrambling to recover the losses. FT reported that nearly 350 containerships, capable of carrying almost 2.4 million boxes of 20 feet, are waiting off ports globally.

With economies reopening and manufacturing picking up, a surge in infections at the docks threatens an already struggling shipping system, that is trying hard to handle the rising demand. Increasing numbers of companies have reported that they are having difficulty in meeting demand and battling pressures to raise prices.

The global semiconductor shortage and the increasing price of raw materials are a direct result of the supply chain bottlenecks caused due to prolonged port shutdowns. Automotive and textiles continue to remain the most affected sectors.

Tesla attributed the constraint in its vehicle production, to the global chip shortage while reporting its earnings for 2Q.

 Europe witnessed a weak industrial production over the summer.

Berkshire Hathway-owned furniture rental company Cort said that its shipments have been months behind schedule amid delays at ports and competition for products with the resurgence of COVID-19 cases as the highly contagious delta variant spreads.

Meanwhile, Ningbo’s health commission said that the city is still considered a low-risk virus area, although flights to and from Beijing have been canceled.

Bloomberg reported that the Ningbo port worker was fully vaccinated with an inactivated vaccine and had the second dose on March 17. The worker was asymptomatic as of Thursday afternoon and got was infected with the delta strain, as shown in the genetic sequencing. Epidemiological investigation showed that the worker had come into close contact with sailors of foreign cargo ships.

(With inputs from Financial Times and Bloomberg)

Picture Credits: Ledger Insights